SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
Commission File Number 33-67422
SABRELINER CORPORATION
A Delaware Corporation
(IRS Employer Identification No. 43-1289921)
Pierre Laclede Center, Suite 1500
7733 Forsyth Blvd., St. Louis, Missouri 63105-1821
Telephone: (314) 863-6880
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
12 1/2% Senior Notes due 2003, Series B
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 (2) has been subject to such filing requirements for the
past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of the
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form K
or any amendment to this Form 10-K. X
The number of shares of the Company's common stock outstanding
on August 31, 1996 was 870,834.
PART I
Item 1. BUSINESS
Sabreliner Corporation with its subsidiaries Midcoast Aviation,
Inc. and SabreTech, Inc. is a diversified aerospace company
providing services in airframe maintenance and
modification, gas turbine engine overhaul and repair,
logistics support and other aerospace products and services
for commercial, corporate and government aviation markets.
During fiscal 1996, Sabreliner reported revenue of $206
million, of which 40% was provided by commercial aviation,
33% was provided by corporate aviation and the remaining 27%
was provided by government aviation business.
During the last fiscal year, the Company achieved a 70%
growth in its revenues, largely due to acquisitions completed
in the prior year and the capture of significant new
government contracts. The Company continued its acquisition
strategy during fiscal 1996, expanding its engine business
through the purchase of two additional product lines.
Turbotech Repairs, Inc. ("Turbotech"), acquired in June,
1996, increases the Company's market penetration by adding
new engine component repairs and major inspection and
overhaul services. The Company also expanded its capabilities
by acquiring the heavy maintenance tooling and license for
the AlliedSignal TFE 731 engine from UNC-Airwork in May, 1996.
The Company believes these acquisitions will expand its market
share within its engine business area, enhancing future
growth and stability. Existing cash balances and an unused
$35 million credit facility will enable the Company to
continue its acquisition strategy, seeking existing businesses
and facilities complementary to its current operations or
providing entrance into new markets (see "Acquisition Strategy"
below).
In addition to growth from its acquisition strategy, the
Company plans to expand its existing business through the
aggressive pursuit of new contracts and through
increased investment in existing facilities and new
tooling capabilities. The continued expansion of the Company's
engine business, including working capital investments to
accommodate the recently acquired product lines and the entry
into new engine types, and the establishment of new
commercial aviation facilities at Orlando are areas of
existing business investments under consideration for the
upcoming year. The Company also intends to build upon its
expanded capabilities to capture new contract awards for
government and corporate aviation. The Company's technical
expertise and customer support are providing opportunities to
increase future revenues by capturing new contracts and by
enlarging its capabilities.
During fiscal 1996, the Company's SabreTech subsidiary was
involved in the crash of ValuJet Flight 592 (see Item 3.
LEGAL PROCEEDINGS and Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS).
Corporate Aviation Business
The Company's corporate aviation business provides airframe,
powerplant and ancillary systems repair, overhaul and
modification services and flight line and spare parts support
to the business aviation market. The revenues of this
business area derive from work on a wide variety of business
aircraft including the Sabreliner, Gulfstream, Falcon,
Cessna, Hawker, Challenger, Lear, and other business jet and
turboprop airframes. The Company services these aircraft for
both domestic and foreign operators, with international sales
in excess of 12% of the corporate aviation business. Total
revenues reported in fiscal 1996 for corporate aviation were
$68.2 million, and are comprised of the following product
lines:
Maintenance and Modification Business
Maintenance is the routine and as-required inspection and
resulting repair of aircraft, including airframe corrosion
condition; maintenance and service bulletin compliance;
avionic, instrument, electrical and hydraulic systems repairs
and overhauls; and the troubleshooting and repair of
aircraft. Modification is the periodic enhancement or
conversion of aircraft, including aircraft painting; avionics
systems installation; interior refurbishment; structural life
extensions or enhancements; and other major corrections or
improvements.
The Company maintains four facilities to provide maintenance
and modification services:
The Perryville Maintenance Center, performing
routine maintenance and modifications on the Sabreliner
fleet;
The St. Louis Downtown Parks Maintenance Center, dedicated
to maintenance and modification efforts on larger "heavy
iron"aircraft, such as Gulfstreams, Falcons and
Challengers;
The Little Rock Maintenance Center, specializing in
smaller and mid-size business aircraft; and
Lambert Field Maintenance Center, which supports base
customers and drop-ins at the Lambert-International
Airport in St. Louis.
The combined facilities of Midcoast and Sabreliner provided
approximately $38.4 million in aggregate maintenance and
modification revenue during fiscal 1996.
Engine Business
The engine business area includes the repair, overhaul and
maintenance of powerplants installed on a variety of
corporate aviation and military aircraft. The Company's
current engine component repair or engine overhaul
capabilities include the following engines:
Manufacturer Engine
Pratt & Whitney PT6, JT12, JT8, J52, J75
General Electric CF700, T700, CJ610, J85
AlliedSignal TFE 731, TPE 331
Lycoming T53
Teledyne J69
Allison A250, T63, T56
The Company's primary facility dedicated to the engine
business is the Neosho plant, with advanced capabilities in
lathing, milling, machining, electron beam and conventional
welding, plating, coating, blending, shotpeening, plasma
spraying, X-ray and magnetic diagnostics, and other
capabilities. During the last fiscal year, the Company
acquired Turbotech, adding component repair capability for the
Pratt & Whitney PT6 and AlliedSignal TPE 331, as well as, full
overhaul authority for the Allison A250. In addition, the
Company acquired the heavy maintenance tooling and license
for the AlliedSignal TFE 731 engine from UNC-Airwork in May,
1996. The addition of the heavy maintenance license for the
AlliedSignal TFE 731 makes Sabreliner one of three companies in
the United States capable of performing an overhaul on this
popular powerplant.
The Company believes growth can be achieved in the engine
business area, due to the recent acquisitions and the
continued investment in tooling and capabilities for other
powerplants and their accessories. Total revenues from the
engine business area in fiscal 1996 were $9.2 million for
corporate aviation.
Other Corporate Aviation Business
In addition to the products and services described above, the
Company provides other aerospace support to the corporate
aviation market, including: fueling, long-term tenant leasing and
flight line services, collectively known as the Fixed Base
Operator (FBO) business, which generated $9.7 million in fiscal
1996 revenue; over-the-counter spare parts, which generated
$6.1 million in revenue during fiscal 1996; and preowned aircraft
sales, which generated $4.8 million in revenue during the year.
Government Business
Sabreliner performs work with the U.S. and foreign governments
for both military and civilian agencies. Of the $55.6 million
in revenue reported on these contracts in fiscal 1996, 48% was
derived from the U.S. Navy, 41% from the U.S. Air Force and 5%
from the U.S. Army. Subcontracts and civilian agencies, such as
the FAA, represent the remaining 6% of this total. Although the
U.S. Department of Defense budget has steadily declined over the
last decade, spending for operations and maintenance - the
funding category for most of the Company's contracts - has
remained and is projected by the government to remain stable.
During 1995, a major task force of government and industry
leaders recommended increasing the government's outsourcing to
the private sector to reduce costs, particularly in the areas of
depot maintenance in which the Company has previously
performed contracts. The Company believes its experience and low-
cost structure enable it to effectively compete on a broad
spectrum of government contracting opportunities.
A description of the Company's significant government
business follows:
The Undergraduate Naval Flight Officers (UNFO) Training
Program
The Company was awarded the UNFO contract in March, 1990, to
perform training services for Navy pilots and navigators,
including: airborne training missions on company-owned radar-
equipped Sabreliner aircraft; simulator training of groundbased
intercept radar and radar mapping; and all logistics, maintenance
and mission support services. To meet the requirements of
this contract, the Company purchased and modified 17
Sabreliner aircraft, designed and installed simulator
training stations, modified airborne tactical radars, and
provided on-site maintenance and logistics crews. This was
achieved by assembling a team of five major subcontractors
and through the initial capital investment of over $99.1 million,
requiring nearly eighteen months of engineering design,
aircraft and radar modifications and other management efforts.
The Company has maintained outstanding performance on the
UNFO program, evidenced through several meritorious
commendations awarded by the Navy, including the prestigious
Vice Admiral Goldthwaite Award. Revenue from this contract in
the last year was $22.8 million.
The 50-month basic contract ended on September 30, 1995 and the
Navy exercised its 36-month option. Quarterly revenues during
the option period are contracted at $3.9 million.
Opportunities exist to generate additional revenue under this
program through the sale of the UNFO aircraft, engines and
simulator stations. Funding in the amount of $45.0 million has
been appropriated by Congress for the U.S. Navy for such a
transaction; further developments await conclusive
legislative actions. Although the Company believes the
purchase transaction will occur within the next fiscal year,
there can be no assurance that this transaction will occur
within this time frame or that it will ever occur.
The C-20 Joint Logistics Support Contract
The U.S. Air Force C-20 contract was awarded to the Company in
July, 1995, to perform on-site logistics support, depot-level
maintenance and engine maintenance of the government's fleet
of 24 Gulfstream C-20 aircraft, which operate out of four
military bases. Performance on the contract started on October
1, 1995. The contract's base year revenue is expected to exceed
$19 million. The contract provides for six more option years,
with an average value of $27 million per year, each exercisable
by the Air Force; the option for the first additional year,
starting October 1, 1996, has been exercised.
The contract was awarded to Sabreliner based upon its team
approach: Sabreliner as prime contractor, providing materials and
administration; UNC, Inc., providing on-site maintenance and
stockroom support; Sabreliner's subsidiary, Midcoast Aviation,
performing depot level maintenance at its Parks facility; and
Rolls Royce-Canada providing engine overhaul and repair support.
Revenues realized in the first nine months of performance,
ending June 30, 1996, were $15.1 million.
The Navy T-2/A-4 Depot Level Maintenance Program
On August 24, 1995, the Company was awarded the T-2/A-4 Depot
Level Maintenance contract for the inspection and repair of the
Navy's fleet of T-2 aircraft and Foreign Military Sales (FMS)
repairs on A-4 aircraft. The contract's base year started
October 1, 1995, and includes four option years; the option for
the first additional year has been exercised. Significant over
and above work requests have been approved by the Navy to
enable the Company to fabricate structural parts for this
aircraft. On December 28, 1995, the Navy inducted its first T-2
aircraft into the Company's Perryville facility under this
contract. As of June 30, 1996, a total of ten Navy T-2
aircraft have been inducted, with two aircraft completed and
delivered, generating revenues in excess of $1.1 million.
The Company has included approximately $9.7 million in its fiscal
1997 backlog for expected deliveries on this contract (see
"Backlog" below). The Company believes opportunities exist to
further increase contract revenues due to the prospect of FMS
orders in the next year.
Government Engine Contracts
The Company holds various contracts for the overhaul and
repair of government-owned engines and engine components. The
largest of these is the Air Force J85 engine component repair
contract, which generated $6.1 million in revenue during
fiscal 1996. The expansion of the Company's capabilities
in engine overhaul and component repair, gained through the
acquisitions of Turbotech and the AlliedSignal TFE 731 heavy
maintenance license and tooling, is expected to increase
government engine contract opportunities. In addition, the
Company is continuing to pursue subcontracts for government
engines, successfully capturing major subcontracts for the
repair of Navy T56 components and for the overhaul of Navy
J52 engine components during fiscal 1996. Total government
engine contract revenues during fiscal 1996 were $12.3 million.
Other Government Business
The Company's broad capabilities and extensive experience in
government contracting enables it to perform a variety of
other government aviation contracts and subcontracts. Other
government business revenues generated in the last year
include subcontracts to provide spare parts and contracts to
repair hydraulic and other system components. Other
government contracts generated revenue of $4.2 million during
fiscal 1996.
Commercial Aviation Business
The Company's acquisition of the three subsidiaries of
DynCorp collectively known as the DynAir Companies, on June 30,
1995, now known as SabreTech, Inc., expanded the Company into the
commercial aviation market. The commercial aviation market
includes: third-party aircraft maintenance services for
commercial carriers, primarily airlines and major freight
carriers; modification and completion services for
manufacturers of airline aircraft; and airline aircraft
storage and spare parts support. The Company maintains three
principal facilities to provide commercial aviation services:
The Phoenix facility at Sky Harbor Airport, providing major
modification and third party maintenance services to
commercial airlines and aircraft manufacturers.
The Miami facility at Miami International Airport,
performing heavy maintenance and line maintenance for
airlines.
The Amarillo facility, a long-term storage and
logistics center for aircraft leasing companies and an
aircraft painting center.
In addition to these established facilities, the Company recently
expanded its facilities by adding third-party maintenance
hangars at Orlando, Florida. These facilities are in their
initiation and start-up phase, with significant revenues beginning
in fiscal 1997.
During fiscal 1996, the Company's revenues from the
commercial aviation business were $81.8 million. Of this, over
$21.3 million was generated in support of McDonnell Douglas
aircraft repairs and modifications. The Company is working to
expand upon the existing relationship with McDonnell Douglas
to provide increased revenues in the next year. Another $5.4
million in fiscal 1996 commercial aviation revenues was
attributed to foreign carriers.
Worldwide demand for air service is expected to grow in all
commercial aviation sectors, due to increased travel and the
proliferation of smaller, independent airlines. In addition, the
expected increase in the conversion of airline passenger aircraft
to freight or cargo carrier aircraft is anticipated to generate
substantial demand for commercial aviation modification
services. Despite the Company's expectations of growth in the
commercial aviation business, future revenues could be adversely
affected by customer perceptions of the Company's involvement in
the crash of ValuJet Flight 592 (see Item 3. LEGAL PROCEEDINGS).
Acquisition Strategy
The Company has employed a strategy of acquiring aerospace
businesses to improve its current market position and
capitalize on its established expertise. The Company is
focusing on two types of acquisition strategies. The first of
the Company's strategies is to identify opportunities where it
can add its existing resources and experience to enhance the
performance of the acquired operation. The Company believes
its strengths in this area include: Original Equipment
Manufacturer (OEM) technical skills; complex operating
capabilities and available facilities; strong contracts
administration; sophisticated financial controls; and the ability
to perform complex programs. The Company's second acquisition
strategy is to seek acquisitions of product lines and
businesses complementary to the Company's existing holdings.
The integration and consolidation of such acquisitions can
provide increases in technical capabilities through sharing of
unique resources and savings in fixed costs by eliminating
redundant operations and administration.
During the last four years, the Company has implemented these
strategies, acquiring five companies or product lines.
In September, 1992, the Company acquired the Neosho Division of
Teledyne Industries, Inc. The acquisition provided the Company
substantial new technical and operating capabilities in engine
and engine component overhaul and repair. Since the
acquisition, the Company has won several government contracts
and captured new commercial product lines for performance at
the Neosho facility and its satellite in Independence,
Kansas. The Company expects to use the capabilities and
resources provided by the Neosho acquisition as a foundation to
build new growth, with the recently-acquired Allison A250 engine
platform and the AlliedSignal TFE 731 heavy maintenance
business to be added to this facility during fiscal year 1997.
The Company acquired Midcoast Aviation, Inc. in November,
1994. Midcoast performs maintenance and modifications on mid-sized
jets and on larger "heavy iron" aircraft. Midcoast has a
reputation for high-quality interior refurbishment
modifications, employing the latest computer-aided design, skilled
craftsmen and sophisticated tooling and processes. The Company
has capitalized on these attributes, combining its existing
contracts administration and financial controls with Midcoast's
technical background to capture the C20 Logistics Support
contract.
In June, 1995, the Company acquired the former DynAir
Companies, now known as SabreTech, Inc. This acquisition
introduced the Company to a complementary market, which
added $81.8 million in revenues and over $3.0 million in
operating profits to fiscal 1996 results before recognition of
the $0.7 million of expenses associated with the crash of ValuJet
flight 592. Since the acquisition, the Company has added new
business and expanded the acquired facilities to include new
facilities at Orlando, Florida.
The Company acquired the heavy maintenance license, tooling and
inventories for the AlliedSignal TFE 731 engine from UNC-Airwork in
May, 1996. Sabreliner's previous experience in TFE 731
maintenance and its existing engine capabilities at the Neosho
facility made this acquisition complementary to ongoing
operations. After establishing this product line in Neosho,
Sabreliner will be one of only three companies in the United
States authorized by the OEM to perform heavy maintenance
on this popular engine.
In June, 1996, the Company acquired Turbotech Repairs, Inc.
(Turbotech). Turbotech is an engine components overhaul and
repair facility located in San Diego, California. By
acquiring Turbotech, the Company has gained entrance into new
engine capabilities including the Pratt & Whitney PT6, the
AlliedSignal TPE 331 accessory market, and the Allison A250,
which will be moved to the Neosho facility.
The Company intends to continue its acquisition strategy,
maximizing its current capabilities and transferring existing
skills to similar recently-acquired businesses. The Company's
existing cash balances and unused credit facility can enable it
to effect an immediate acquisition, allowing rapid response to
changing markets and new opportunities. However, there can be
no assurance the Company will be successful in implementing
its acquisition strategies or whether or when the Company will
make other acquisitions.
Product Liability Exposure
The Company is the OEM for the Sabreliner series of aircraft and,
in accordance with the agreement pursuant to which the Company
purchased the Sabreliner Division of Rockwell International
in 1983, Rockwell bears the responsibility for all known
liabilities relating to such aircraft occurring on or before June
30, 1983, while the Company is responsible for all occurrences
after such date. In addition to the inherent risks of the
Company's OEM status regarding the Sabreliner aircraft, the
Company is responsible for its performance in the repair and
modification of critical engine and airframe components and its
performance in the support of its other income-producing
functions.
The Company's involvement in the crash of ValuJet Flight 592 has
led to civil lawsuits filed by the families of the 110 victims.
The Company believes its product liability insurance
coverage will be adequate to fund such legal costs (see Item 3.
LEGAL PROCEEDINGS).
Although the Company has historically maintained adequate
insurance coverage for such risks, there can be no assurance that
such coverage will continue to be available in amounts or on
terms acceptable to the Company or that such coverage will be
adequate for liabilities actually incurred. The Company has not
experienced any material loss from product liability claims and
believes that its present insurance coverage is adequate to
protect it against any claims to which it may be subject.
Competition
Most of the Company's production and service capabilities are
possessed in varying degrees by other companies in the
industry, including both domestic and foreign firms. Many of
these companies are larger and have greater resources than the
Company. Competition is intense among companies currently
involved in the industry. Competitive advantages are afforded
to those with high-quality products and services, low-cost
manufacturing, excellent customer service, on-time deliveries, and
engineering and production expertise. The Company believes it
competes favorably with respect to these factors.
The corporate aviation industry is the Company's most
competitive arena, with hundreds of small and large shops
vying for market share. The Company's primary competitors are
Atlantic Aviation, UNC-Garrett, K.C. Aviation, AVMATS, Bizjet,
Duncan Aviation and other, smaller companies that perform
aircraft maintenance and modification work.
The Company's competition for government contract awards
include original equipment manufacturers, incumbent
contractors, small businesses, government-owned and operated
depot maintenance facilities, foreign-owned and operated
businesses and designated service facilities appointed by
original equipment manufacturers. All major government
contracts currently being performed by the Company were
subject to competitive award; the Company holds no
significant sole-source contracts.
Although the commercial aviation business is subject to a
smaller number of competitors due to the larger facility and
capital intensive tooling requirements, competition for
customer demand is still strong. Key market considerations used
by the Company to differentiate its capabilities from
competitors include: location for line maintenance
customers; on-time delivery and accelerated turn-times for the
airline industry; and quality and reliability for aircraft
manufacturers support. The Company's primary competitors
include: Aero Corporation; Dee Howard Company; Lockheed Aeromod;
Mobile Aerospace Engineering; Pemco Aeroplex; Timco; and
Tramco as well as the internal maintenance operations of many
of the Company's potential customers.
Suppliers
In the ordinary course of business, the Company procures
materials and purchased services from outside vendors,
subject to internal "make vs. buy" determinations and
competitive bidding, if appropriate. With the exception of
certain proprietary engine assemblies, all of the Company's
supplier needs can be fulfilled by alternate supplier
competitors. The Company does not place undue reliance on any
one supplier; the majority of its revenue is derived from labor
services performed by employees.
Backlog
The total contract price of undelivered firm orders by
business area as of June 30, 1996 and 1995 was as follows:
Backlog as of June 30
1996 1995
(Dollars in Thousands)
Government Business $77,404 $ 70,018
Corporate Aviation 5,807 7,570
Commercial Aviaton 24,880 17,997
$108,091 $95,585
Of the total backlog as of June 30, 1996, over 70% will be
completed and delivered during fiscal year 1997. Not
included in backlog is the possible sale of the UNFO training
system assets, funded for $45 million but not yet ordered.
Regulatory Compliance
Environmental Regulation
The Company is subject to extensive, stringent and changing
federal, state and local environmental laws and regulations,
including those regulating the use, handling, storage,
discharge and disposal of hazardous substances and the
remediation of any potential environmental contamination.
Accordingly, the Company is involved from time to time in
administrative and judicial investigations and proceedings
regarding environmental issues.
The Company has been subject to governmental inquiry
regarding an alleged environmental incident that may have
occurred at the Perryville facility prior to the flooding
of the facility in July 1993. Requests for documents
concerning this matter were received during fiscal
1996. All requests for documents have been complied with
or are in the process of resolution and no other significant
actions or developments have occurred during fiscal 1996.
The Company's handling of oxygen generators prior to the
ValuJet Flight 592 crash has instigated an investigation by
federal and state environmental regulatory authorities into
the hazardous material handling procedures at the Company's
facility at Miami. The status and any findings of these
investigations has not been announced. The Company continues to
cooperate fully throughout these investigations (see Item 3.
LEGAL PROCEEDINGS).
In addition to the environmental regulatory actions
identified above, the Company has performed internal
investigations and evaluations of environmental regulatory
compliance. There are three sites under evaluation, total
remediation costs are expected to be less than $300,000, much of
which is expected to be borne by Superfund insurance funds or
paid by previous facility operators, in accordance with
indemnity provisions contained within purchase agreements.
The Company continues to design and implement a system of
programs and facilities for the management of its production
processes and industrial waste to provide compliance with
environmental requirements. Efforts are under way to provide
systematic monitoring of fuel and waste storage tanks and to
upgrade certain underground storage tanks to comply with the
Environmental Protection Agency's recent directives. The
Company anticipates aggregate capital expenditures made
during the next four years to comply with current EPA
guidelines will be less than $500,000.
Other Government Regulation
The Federal Aviation Administration (FAA) prescribes
standards and licensing requirements for aircraft components
and licenses component repair stations within the United
States, and comparable agencies regulate such matters in
other countries. The Company holds several FAA component
certificates and performs component repairs at all of its
operating facilities.
In the aftermath of the ValuJet Flight 592 crash, the Company
has been subjected to increased scrutiny by the FAA and the
National Transportation Safety Board (NTSB). These agencies are
conducting investigations into the circumstances
surrounding the ValuJet crash and have sought information
from the Company in connection therewith. The Company has
complied with all investigation requests. To date, the NTSB
has not determined the probable cause(s) of the ValuJet
crash, nor has the FAA issued any proposed enforcement
actions arising out of its investigations (see Item 3.
LEGAL PROCEEDINGS).
Employees
As of June 30, 1996, the Company had approximately 1,750
employees, of which approximately 1,550 were engaged in
operations, including the repair and maintenance of aircraft,
aircraft components and jet engines. The remaining
approximately 200 employees were dedicated to sales,
marketing and general administration. Approximately 12% of
the Company's employees are represented by unions. In
addition, the Company utilizes contract mechanics to perform
work on aircraft and aircraft components within its
facilities. As of June 30, 1996, the Company contracted for
the services of approximately 520 contract mechanics.
Item 2. PROPERTIES
The Company leases or owns an aggregate of approximately 2.5
million square feet of space. The Company believes its
facilities are well maintained, are suitable to support the
Company's business and are adequate for the Company's present
and anticipated needs.
The following table sets forth the Company's principal
facilities and indicates the location and function of each:
Approximate
Location Sq. Footage Primary Function Owned/Leased*
Perryville, 150,000 Airframe Leased through
Missouri maintenance and 2031
modification
for corporate
aviation and
government markets.
Neosho, 320,000 Engine and Owned
Missouri component
overhaul and
repair for
corporate
aviation and
government
markets.
Cahokia, 160,000 Airframe Various leases
Illinois maintenance and through 2012
modification
for corporate
aviation and
government markets.
Phoenix, 300,000 Airframe Leased through
Arizona maintenance and 2004
modification
for commercial
aviation markets.
* Includes all exercisable options.
Item 3. LEGAL PROCEEDINGS
On May 11, 1996, ValuJet Flight 592 from Miami, carrying 110
passengers and crew crashed into the Florida Everglades.
Prior to take-off, employees of SabreTech's Miami facility
returned to ValuJet various company materials, including
five boxes containing oxygen generators, which, after
consultation with ValuJet's flight crew, were loaded into the
cargo bay of Flight 592 by ValuJet employees. Although the
cause of the crash has not been officially determined by the
National Transportation Safety Board (NTSB), SabreTech's actions
associated with Flight 592 have been included in the NTSB
investigation. The Federal Aviation Administration (FAA) is
also conducting an investigation into the circumstances
surrounding the ValuJet crash and has sought information from
SabreTech and various of its employees and contract workers
in connection therewith. In addition, SabreTech is one of
several subjects of an investigation being conducted by a
federal grand jury in conjunction with the United States
Attorney for the Southern District of Florida. The Company
has cooperated fully throughout these investigations and is
continuing to do so. Public hearings concerning the crash of
Flight 592 are expected to be held in November, 1996.
SabreTech, ValuJet and others have been named as defendants in
numerous wrongful death actions that have been filed by
families of victims. Additional wrongful death actions are
expected to be filed. The Company's legal costs of defending
against these civil actions and any possible claim settlements
are funded by the Company's insurance policies. Management
believes coverage is adequate to provide for such legal actions.
SabreTech, ValuJet and others also have been named as
defendants in two class action lawsuits brought by
stockholders of ValuJet. The Company believes that it has
meritorious defenses in the two actions.
Costs associated with this incident, such as media
relations, incremental professional services, legal fees and
other costs related to the various investigations and other
lawsuits, of approximately $0.7 million were incurred in the
Company's fourth quarter. Additional costs incurred in
subsequent periods will be recognized as incurred. While the
ultimate outcome of the legal actions related to the ValuJet
Flight 592 crash and the length of time necessary to resolve
all the outstanding issues cannot be determined at this time,
the Company believes the continuing effects of the
investigations and related lawsuits will not have a material
adverse effect upon the results of operations or financial
condition of the Company.
The Company has been subject to government inquiry regarding an
alleged environmental incident that may have occurred at the
Perryville facility prior to the flooding of the facility
in July, 1993. Requests for documents concerning this matter
were received during fiscal 1996. All requests for documents
have been complied with or are in the process of resolution
and no other significant actions or developments have occurred
during fiscal 1996.
In addition to the litigation discussed above, the Company is
subject to other legal proceedings and claims arising in the
ordinary course of its business. Although there can be no
assurance as to the outcome of litigation, it is the opinion
of management (based upon the advice of legal counsel)
that all such actions or proceedings are covered by insurance or
will be resolved without material effect on the Company's
financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS
The outstanding shares of the Company's common stock are not
traded on any established public market.
As of August 31, 1996, there were 34 shareholders of the
Company's common stock.
The Company has paid one dividend in the amount of $9,932,000 in
the first quarter of fiscal 1994. The Company expects to pay
annual dividends as its earnings and debt convenant
restrictions allow. For further information, see Note 7 of
the Notes to Financial Statements on pages F11 through F13 of
this report.
Item 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
Fiscal Years Ended June 30
1996 1995 1994
Income Statement Data
Revenue (1) $205,633 $120,908 $103,786
Cost of revenue 171,045 91,867 79,626
Gross margin 34,588 29,041 24,160
Selling, general and
administrative expense 22,956 17,251 14,655
Operating income 11,632 11,790 9,505
Interest expense 11,789 11,123 11,459
Litigation settlement (2) - - -
Other income expense) 877 481 33
Income tax (expense) benefit (350) (350) 3,651
Net income (loss) before
extraordinary loss and
change in accounting
principle 370 798 (5,883)
Extraordinary loss on early
debt extinguishment - - -
Cumulative effect of
change in accounting
principle,
postretirement benefits - - -
Net income (loss) $ 370 $ 798 $(5,883)
Other Data
EBITDA (3) $ 24,397 $36,243 $ 24,024
Cash flows from operating
activities 10,582 20,038 11,329
Cash flows from investing
activities (7,354) (31,857) (5,568)
Cash flows from financing
activities (853) (578) (9,617)
Depreciation and
amortization (4) 11,888 23,972 22,099
Capital expenditures (4) 4,346 3,788 5,568
Ratio of EBITDA to
consolidated interest
expense (5) 2.1x 3.3x 2.1x
Ratio of earnings to
fixed charges 1.1x 1.1x .2x
Per Share Data
Earnings Per Share (EPS)(6):
EPS before extraordinary loss
and change in accounting
principle $ 0.42 $ 0.91 $ (6.66)
Extraordinary loss - - -
Cumulative change in
accounting principle - - -
Total earnings per share (6) $ 0.42 $ 0.91 $ (6.66)
Book value per share $ 11.64 $ 11.18 $ 10.33
Cash dividends declared - - -
Balance Sheet Data
Cash and cash equivalents $ 12,254 $ 9,879 $22,276
Total current assets 85,326 74,279 70,257
Total assets 144,618 135,855 126,403
Total current liabilities 36,660 28,879 25,681
Total long-term debt,
including current portion 94,915 93,214 88,630
Stockholders' equity 10,136 9,853 9,116
Fiscal Years Ended
June 30
1993 1992
Income Statement Data
Revenue (1) $121,174 $119,043
Cost of revenue 94,464 87,717
Gross margin 26,710 31,326
Selling, general and
administrative expense 14,469 13,250
Operating income 12,241 18,076
Interest expense 4,942 5,342
Litigation settlement (2) - -
Other income expense) (111) (790)
Income tax (expense) benefit (2,660) (4,459)
Net income (loss) before
extraordinary loss and
change in accounting
principle 4,528 7,485
Extraordinary loss on early
debt extinguishment (1,150) -
Cumulative effect of
change in accounting
principle,
postretirement benefits (682) -
Net income (loss) $ 2,696 $ 7,485
Other Data
EBITDA (3) $34,996 $32,859
Cash flows from operating
activities 32,591 21,609
Cash flows from investing
activities (8,853) (39,385)
Cash flows from financing
activities (486) 19,603
Depreciation and
amortization (4) 22,877 15,358
Capital expenditures (4) 6,815 39,385
Ratio of EBITDA to
consolidated interest
expense (5) 7.1x 4.7x
Ratio of earnings to
fixed charges 2.4x 2.4x
Per Share Data
Earnings Per Share (EPS)(6):
EPS before extraordinary loss
and change in accounting
principle $ 5.24 $ 8.99
Extraordinary loss (1.33) -
Cumulative change in
accounting principle (0.79) -
Total earnings per share (6) $ 3.12 $ 8.99
Book value per share $ 17.59 $ 26.56
Cash dividends declared 11.25 -
Balance Sheet Data
Cash and cash equivalents $26,132 $ 2,880
Total current assets 76,126 61,308
Total assets 146,332 147,031
Total current liabilities 34,666 55,724
Total long-term debt,
including current portion 88,510 88,051
Stockholders' equity 14,823 19,555
(1) Revenue for fiscal 1994 was adversely affected by the
flooding of the Company's facilities in Perryville and
St. Louis. Revenue for fiscal 1995 includes eight months
of Midcoast Aviation, Inc. activity. Fiscal 1996 revenue
includes the addition of the SabreTech acquisition made on
June 30, 1995 and a full twelve months of Midcoast
Aviation revenue (see Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS).
(2) Litigation settlement relates to the Hannon-Armstrong
financing dispute. The amount is separately identified
to provide more ready comparison of fiscal year results
and to adjust the 1994 fiscal year data to be more
indicative of future results of operations.
(3) EBITDA represents net income before interest, income
taxes, depreciation and amortization. EBITDA and the
ratio of EBITDA to consolidated interest expense are
provided solely as supplemental disclosures as an
indicator of the Company's ability to comply with the
Consolidated EBITDA Coverage Ratio requirements contained
in the Indenture relating to its senior notes. EBITDA
should not be construed as an alternative to operating
income (as determined in accordance with GAAP), or to
cash flows from operating activities (as determined in
accordance with GAAP), or as a measure of liquidity.
(4) On March 6, 1990, the Company was awarded the UNFO
contract (for a description of this contract, see Item 1.
BUSINESS). Assets capitalized on the performance of this
program increased asset values a total of $99.1 million, of
which $38.5 million occurred in fiscal 1992. These
assets were depreciated over the base period of the
contract which ended September 30, 1995.
(5) For purposes of calculating the ratio of EBITDA to
interest expense, interest expense represents all
interest and financing costs paid and accrued for each
respective period, including capitalized interest or
deferred financing fees.
In accordance with the EBITDA coverage ratio calculation
methods prescribed in the Indenture relating to the
Company's Senior Notes, the addition of eleven months'
pro forma earnings for the acquisition of the TFE 731
heavy maintenance product line on May 23, 1996, and the
addition of twelve months earnings of Turbotech Repairs,
Inc., acquired on June 27, 1996, would increase the
coverage ratio to 2.2 times consolidated interest
expense, after giving effect of the pro forma interest on
the Turbotech mortgages kept in place after that
acquisition.
(6) Earnings per share are computed using the average number of
shares of common stock outstanding during the respective
year, plus dilutive common stock equivalents.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Overview
Key acquisitions made by the Company during fiscal 1995
generated significant growth during fiscal 1996, resulting in
revenue exceeding $205 million for the year. The gross
margin provided by these acquisitions more than offset the
expected decline in gross margin associated with the
Company's largest government contract, the Undergraduate
Naval Flight Officers (UNFO) contract, resulting in a total
gross margin increase of $5.5 million. Despite these
positive actions, overall net income for fiscal 1996 declined
from the previous year by $0.3 million due to the $0.7
million in expenses recognized by the Company relating to the
ValuJet incident (see Item 3. LEGAL PROCEEDINGS).
During fiscal 1996, the Company continued its acquisition
strategy, acquiring new businesses to bolster its position in the
engine maintenance market. In addition, the Company captured
two significant government contracts during fiscal 1996, the C-
20 logistics contract, valued at over $181 million over
seven years, and the Navy T-2/A-4 contract, valued at $30
million over five years. The Company also expanded its
commercial aviation business during the year by adding a new
facility at Orlando, Florida. These developments, coupled
with the possible award of other major contracts with the
government and subcontracts, are anticipated to continue the
growth in revenues and augment net income in the next year.
Despite the Company's expectations of growth in each of its
major business areas, no assurance can be provided that the
Company will be successful in capturing new business. In
addition, future revenues and results of operations could
be adversely affected by customer reactions to the perceptions
of the Company's involvement in the crash of ValuJet Flight 592
(see Item 3. LEGAL PROCEEDINGS).
Fiscal 1996 Compared to Fiscal 1995
Revenue. The acquisition of SabreTech and Midcoast Aviation in
fiscal 1995 provided increased volume in fiscal 1996,
contributing to a revenue increase of 70% from the prior
year. Revenue increases attributable to these two
acquisitions were $104.0 million during fiscal 1996. Without
these acquisitions, the remaining business revenues would
have declined by $19.3 million due to reductions in
government contract revenues, primarily the UNFO program. The
conversion of the UNFO program from its base contract period,
ended September 30, 1995, to its three-year option period
reduced revenues by $21.5 million. Offsetting the previously
anticiapted decline in UNFO revenues were increases in other
areas of the remaining businesses due to new contract awards,
including the C-20 logistics contract and the Navy T-2/A-4 depot
level maintenance contract.
Gross Margin. During fiscal 1996, the Company was able to
increase gross margins from the preceding year by $5.5
million, or 19%, despite the gross margin decline from the
conversion of the UNFO contract to its option period. The
conversion of the UNFO basic contract to its three-year
option period reduced fiscal 1996 gross margin by $7.1
million from the previous year. The acquisitions of Midcoast and
SabreTech more than compensated for this reduction by providing
$11.8 million in increased gross margin.
Although the dollar value of gross margin increased, gross
margin as a percent of net revenue declined for the year,
compared to fiscal 1995. The overall decline in gross margin
percentage, from 24% in fiscal 1995 to 17% in fiscal 1996
reflects the change in the Company's revenue mix toward the
lower-yield, labor-intensive commercial aviation business.
Selling, General and Administrative Expense. The expansion in
administration staff and the new responsibilities stemming from
the acquisition of SabreTech increased selling, general and
administrative expense during fiscal 1996 by $5.2 million over
the preceding year. In addition, the legal and other
professional costs attributed to the ValuJet incident (see
Item 3. LEGAL PROCEEDINGS) required the recognition of $0.7
million in expense during 1996. Without these items,
selling, general and administrative expense would have
declined by $0.2 million from the prior year, reflecting the
Company's continued cost containment and centralization
initiatives.
Interest Expense. The $0.7 million increase in interest
expense experienced in fiscal 1996, versus the prior year, is
attributable to a decline in interest income earned on
available cash balances due to the deployment of cash to
acquire new businesses during fiscal 1995.
Other Income (Expense). Of the total $0.9 million in other
income recognized during fiscal 1996, $0.7 million is
attributable to an insurance claim paid to the Company for
lost property.
Fiscal 1995 Compared to Fiscal 1994
Revenue. Net revenue for fiscal year 1995 increased by $17.1
million over the prior year. The acquisition of Midcoast
Aviation, Inc. on November 2, 1994, added revenue of $25.0
million. Without the revenue generated by Midcoast, revenue
would have declined from fiscal 1994 by $7.7 million. This
revenue reduction can largely be attributed to two factors: a
nonrecurring price adjustment on the UNFO contract
experienced in fiscal 1994 which increased that year's
revenue by $2.5 million, and a reduction in pre-owned
aircraft sales activity in fiscal 1995 versus 1994, resulting in
a drop in revenues of $4.3 million.
Gross Margin. Gross margin for fiscal year 1995 increased by
$4.9 million over the prior year. The Midcoast acquisition
provided $3.4 million of this increase. The resumption of
activities at the Company's Perryville facility, temporarily
shut down during most of fiscal 1994 due to flooding,
increased fiscal 1995 gross margin from the prior year by
approximately $1.1 million. Cost containment initiatives,
particularly in the on-site logistic costs of the UNFO
program, generated an additional $0.5 million in gross
margin.
Selling, General and Administrative Expense. Excluding
nonrecurring legal fees of $1.9 million associated with the
Hannon-Armstrong lawsuit, which were incurred in the first two
quarters of fiscal 1994, selling, general and
administrative expenses for fiscal 1995 were higher than the
previous year by $4.5 million. These increases were largely due
to the expansion in administrative staff and the
responsibilities stemming from the Midcoast acquisition.
Interest Expense. Interest expense declined slightly in 1995
from the prior year, by $0.3 million. This reduction
reflects the increased interest income earned on outstanding
cash balances throughout the year.
Fiscal 1994 Compared to Fiscal 1993
Revenue. Revenue for fiscal 1994 was lower than the prior year
results by $17.4. The decline in revenue reported for fiscal
1994 was due to reductions in deliveries in government contracts
and to business interruption and delays caused by the flooding
of the Company's facilities in Perryville and Chesterfield,
Missouri. The decrease or delay of revenue attributable to
the flood was partially offset by increases attributable to new
business generated by new contract awards at the Company's
Neosho facility, representing improvements in fiscal year 1994
net revenue of $8.1 million.
Gross Margin. Gross margin for fiscal year 1994 was $2.5
million lower than the previous year. Although the flooding of
the Company's facilities reduced revenue for fiscal 1994,
insurance proceeds and mitigating actions taken by the
Company prevented an adverse impact on gross margin. During
fiscal 1993, significant deliveries were made on the Army T53
engine contract for a retroactive pricing change, yielding
over $2.7 million in related gross margin. These types of
deliveries were not repeated in fiscal 1994.
Selling, General and Administrative Expense. Selling,
general and administrative expense for fiscal 1994 reflects an
increase over the prior year of $0.2 million. This
increase was primarily due to costs associated with an
internal investigation of environmental compliance totaling
$0.7 million. Excluding this item, selling, general and
administrative expense declined from fiscal 1993 by $0.5
million. This decline was largely due to the cost
containment initiatives implemented in the last quarter of
fiscal 1993.
Interest Expense. The increase in interest expense for
fiscal 1994 reflects the Company's issuance of $90.0 million in
Senior Notes on June 28, 1993, bearing an interest rate of 12.5%.
These Senior Notes were used to retire the outstanding
indebtedness from the Company's previous financing facility,
which bore a lower interest rate.
Litigation Settlement. The litigation settlement reported for
fiscal 1994 represents an agreement with Hannon-Armstrong entered
into on December 30, 1993. The settlement agreement followed a
U.S. District Court judgment against the Company on November 30,
1993.
Liquidity and Financial Resources
The Company's cash balance increased during fiscal 1996 by
$2.4 million, resulting in an ending cash balance as of June 30,
1996 of $12.4 million. Earnings before depreciation and
amortization added $12.3 million during the year, offset by
increases in working capital of $1.7 million, capital
expenditures of $4.3 million, and acquisitions of $3.0
million. Also reducing cash generated by earnings were debt
repayments and treasury stock purchases, totaling $0.9
million.
During 1995, net income, depreciation and amortization
generated $24.8 million in cash flow. Combined with
beginning cash balances of $22.3 million, the Company had
$47.1 million in available resources in 1995 to fund
operations, acquire assets and repay debt. Increases in
working capital absorbed $4.7 million, largely due to the
realization of deferred contract revenue and deferred tax
liabilities. Investing activities required $31.8 million in
1995, consisting of $15.4 million for the acquisition of
Midcoast Aviation, Inc., and $12.6 million for the
acquisition SabreTech, with the remaining $3.8 million
required for capital expenditures for the existing business.
After deducting debt repayments and other financing
activities of $0.6 million, the remaining cash balance at
June 30, 1995, was $9.9 million.
In the next year, the Company expects to make investments in
facilities, tooling and capabilities of its existing
businesses to permit expansion within the growing markets of
commercial and corporate aviation. The acquisition of
tooling and the investment in working capital to add new
engine types to the Company's capabilities and the
establishment of the new commercial aviation facility at
Orlando are among the investments under consideration for the
upcoming year. In addition to capital expenditures planned for
the next year, the Company is required to make contingent
purchase price payments to DynCorp for the acquisition of
SabreTech of approximately $2.3 million.
Future cash balances may be increased by the possible sale of the
Company's UNFO training system assets to the U.S.
Government. Funding in the amount of $45.0 million has been
appropriated by Congress for the U.S. Navy for such a
transaction; further developments await conclusive legislative
actions. If the proposed sale occurs, the Company's cash balances
would be increased, after taxes, by approximately $35
million. Although the Company believes this transaction will
occur during the next fiscal year, there can be no assurance
that this transaction will occur within this time frame or that
it will ever occur.
In anticipation of future capital investment needs, the
Company expanded its secured working capital credit facility
with Star Bank during 1996 to allow borrowings up to $35
million. As of June 30, 1996, this credit facility remained
unused. The Company believes this credit facility, combined with
its current $12 million cash balance and the cash flows generated
by operations, will be adequate to meet future cash requirements
for operations the funding of capital expenditures and
acquisitions.
The Corporation had an overall net deferred tax asset of
approximately $1.5 million at June 30, 1996. Management
believes it is more likely than not the deferred tax asset
will be realized through future reversals of existing taxable
temporary differences against existing deductible differences and
projects of taxable income in future periods.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of Sabreliner Corporation and Notes to
Consolidated Financial Statements appear on pages F1 through
F19 of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain biographical
information with respect to Directors and Executive Officers of
the Company.
Name Positions Held Age
F. Holmes Lamoreux Chairman of the Board of 54
Directors, President
and Chief Executive
Officer
Jerry L. Leath Executive Vice President and 55
Chief Operating Officer
Rodney E. Olson Senior Vice President, Finance 41
and Corporate Development and
Chief Financial Officer
Susan S. Aselage Director, Vice President, 41
Secretary and Assistant
Treasurer
Bob D. Hanks Vice President - Operations 56
Gene L. Harbula Vice President - Government 49
Marketing and Corporate
Communications
Gail B. Johnson Vice President, Assistant 58
Secretary and Administrative
Assistant
Arthur H. Fredston Director 67
Mary B. Harmon Director 48
F. Holmes Lamoreux has been Chairman of the Board of
Directors, President and Chief Executive Officer of the
Company since before 1991. He is also a partner in Wolsey & Co.
Mr. Lamoreux is a Director of General Aviation Manufacturers
Association and the Civic Entrepreneurs Organization in St.
Louis and a Trustee of The Hill School in Pottstown, Pennsylvania.
Jerry L. Leath has served as Executive Vice President and
Chief Operating Officer since September, 1994. In June, 1996 Mr.
Leath also assumed direct responsibility for Quality Assurance
and Environmental and Safety. Prior to rejoining the Company,
Mr. Leath served as Vice President, Administration of
Figgie International, Inc. since 1992. Prior to that he had
served as Vice President, Administration for the Company since
before 1991.
Rodney E. Olson has served as Senior Vice President, Finance and
Corporate Development and Chief Financial Officer since
September, 1994. Mr. Olson joined the Company in June, 1992 as
Vice President, Finance/Administration and Chief Financial
Officer. Prior to joining the Company, Mr. Olson was a
Senior Manager with the accounting firm of Ernst & Young
since before 1991.
Susan S. Aselage has been a Director of the Company and its Vice
President, Secretary and Assistant Treasurer since before
1991. She is a Trustee of the Aircraft Builders Council.
Bob D. Hanks has served as the Company's Vice President,
Operations since June, 1995. In 1993 he also assumed
responsibility for Quality Assurance which was assumed by Mr.
Leath in June, 1996. Mr. Hanks had served as Vice President,
Engineering since before 1991.
Gene L. Harbula has served as Vice President, Government
Marketing and Corporate Communications since September, 1995.
Mr. Harbula had served as Vice President, Corporate
Development from before 1991. In 1993 he also assumed
responsibility for Government Marketing.
Gail B. Johnson has been Vice President, Assistant Secretary and
Administrative Assistant since September, 1995. Ms. Johnson
had been Assistant Secretary and Administrative Assistant
from before 1991.
Arthur H. Fredston has been a Director of the Company since
before 1991. Mr. Fredston has also been a partner in the law firm
Winthrop, Stimson, Putnam & Roberts since before 1991. Mr.
Fredston is also a co-trustee of a trust which holds all of the
common stock beneficially owned by Mr. Lamoreux. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" below.
Mary B. Harmon became a Director of the Company in 1992. Ms.
Harmon is a private investor in Florida, and is Chairman of the
Board of Directors and Senior Officer of Thames Pharmacal Co.,
Inc.
Directors of the Company hold office until the next annual
meeting of stockholders or until their successors are duly
elected and qualified. All officers of the Company are
elected by and serve at the discretion of the Board of
Directors of the Company.
Item 11. EXECUTIVE COMPENSATION
The following table sets forth information with respect to the
Chief Executive Officer and the four most highly
compensated executive officers of the Company for the year
ended June 30, 1996.
Summary Compensation Table
Name and Option All Other
Principal Position Year Salary Bonus Granted Compensation (1)
F. Holmes Lamoreux 1996 $346,643 $ - - $14,730
Chairman of the 1995 320,000 - - 12,977
Board of Directors, 1994 320,000 - - 18,986
President and
Chief Executive
Officer
Jerry L. Leath, 1996 184,698 - 5,000 12,551
Executive Vice 1995 139,028 65,000 5,000 73,696(2)
President and 1994 - - - -
Chief Operating
Officer
Rodney E. Olson, 1996 137,583 - 4,500 10,820
Senior Vice 1995 125,833 65,000 3,000 9,092
President, Finance 1994 100,417 - - 10,384
and Corporate
Development and
Chief Financial
Officer
Bob D. Hanks, 1996 106,625 - - 11,427
Vice President, 1995 97,825 40,000 - 44,223(3)
Operations 1994 90,900 - - 9,159
Gene L. Harbula, 1996 106,349 - - 7,583
Vice President, 1995 103,257 50,000 - 4,465
Marketing and 1994 101,000 - - 6,194
Corporate
Communications
(1) Represents 401(k) plan payments (including matching,
profit sharing and discretionary contributions) and term
life insurance premiums. For fiscal year 1996, 401(k)
plan payments were $10,500 for F. Holmes Lamoreux, $10,500
for Jerry L. Leath, $10,500 for Rodney E. Olson, $7,199 for
Gene L. Harbula and $10,264 for Bob D. Hanks. Term life
insurance premiums for fiscal year 1995 were $4,230 for F.
Holmes Lamoreux, $2,051 for Jerry L. Leath, $320 for Rodney
E. Olson, $1,163 for Bob D. Hanks and $384 for Gene L.
Harbula.
(2) Includes moving allowance of $65,590.
(3) Includes moving allowance of $35,780.
Stock Option Plans
The Company currently maintains two stock option plans,
pursuant to which options to purchase shares of common stock
are outstanding or available for future grant. The plans are
administered by the Company's Board of Directors. No member of
the Board of Directors receives awards under the plans.
Set forth in the following tables is summary information
regarding stock options granted in 1996 and stock options
exercised during 1996 and outstanding at June 30, 1996 for
each of the executive officers listed in the Summary
Compensation Table.
Options Granted in 1996
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted in 1996 ($/Share) Date
F. Holmes Lamoreux - - $ - -
Jerry L. Leath 5,000 31% 12.50 7/25/2005
Rodney E. Olson 4,500 28% 12.50 7/25/2005
Bob D. Hanks - - - -
Gene L. Harbula - - - -
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Term
Name 5% ($) 10% ($)
F. Holmes Lamoreux $ - $ -
Jerry L. Leath 39,300 99,600
Rodney E. Olson 35,370 89,640
Bob D. Hanks - -
Gene L. Harbula - -
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Options at
June 30, 1996 June 30, 1996
Shares (#) ($)
Acquired Exercisable Exercisable
on Value (E)/ (E)/
Exercise Realized Unexercisable Unexercisable
Name (#) ($) (U) (U)
F. Holmes Lamoreux - $ - - $ -
Jerry L. Leath - - 2,500 E 5,950 E
7,500 U 7,650 U
Rodney E. Olson - - 1,500 E 3,570 E
6,000 U 5,100 U
Bob D. Hanks - - - -
Gene L. Harbula - - - -
Compensation of Directors
Directors of the Company are compensated for their services as
directors. Each director of the Company receives $24,000
annually in respect of his or her services as director, and is
reimbursed for ordinary and necessary expenses in attending
Board meetings.
Employment Contracts and Termination of Employment and
Change of Control Arrangements
The Company's Executive Vice President's employment is
subject to a three-year agreement which expires September 15,
1997. The agreement survives any merger or consolidation.
If termination occurs, for any reason other than cause, after
the expiration of the agreement, a minimum of six months' base
salary will be paid at the then current base salary.
The Company's Senior Vice President and Vice Presidents
(other than Ms. Aselage) have entered into agreements with
the Company regarding arrangements in an event of a sale or a
merger of the Company (the "Change of Control Arrangements"). In
the event of a sale or merger of the Company, each such person
will be entitled to a bonus equal to six months of such
person's salary at such time. Such bonus will be paid in a
lump sum one month after the date of the sale or merger if the
individual remains with the Company through the date of sale.
An additional bonus amounting to six months salary will be paid
to each such person one year from the date of sale if his or
her employment continues and such person does not voluntarily
terminate employment before the one-year anniversary date.
In addition to regular severance compensation, a separation
allowance (the "Separation Allowance") will be paid if
employment is terminated subsequent to the sale or merger.
The Separation Allowance amounts to six months salary, which
will be paid over a six month period beginning 30 days after
the date of the sale or merger, or upon termination of
employment by the buyer of the Company. However, the
Separation Allowance will not be paid if a buyer of
the Company terminates the employment for cause.
Amounts payable as of June 30, 1996, in scenarios discussed
above with respect to officers listed in the Summary
Compensation Table would be $226,260 for Mr. Leath, $139,100
for Mr. Olson, $119,000 for Mr. Hanks and $109,200 for Mr.
Harbula. The remaining eligible Vice Presidents would be
paid an aggregate of $90,000.
Additional Information
The annual salary and bonus allocations for the executive
officers set forth in the Summary Compensation Table are
determined annually by Mr. Lamoreux in his capacity as the
Chief Executive Officer of the Company. The adjustment of
Mr. Lamoreux's compensation is determined and approved by the
Board of Directors.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table and notes thereto set forth certain
information with respect to the beneficial ownership of the
Company's common stock as of August 31, 1996, by (i) each
person who is known to the Company to beneficially own more
than 5% of the outstanding shares of common stock of the
Company, (ii) each director who owns shares of common stock
(iii) for the Chief Executive Officer and the four most
highly compensated officers and (iv) all directors and
officers as a group. Except as otherwise indicated, each of
the stockholders named below has sole voting and investment
power with respect to the shares of common stock beneficially
owned by him or her.
Name and Address Number of Percent of
Shares Total
F. Holmes Lamoreux 462,458(1) 53.1% (1)
Sabreliner Corporation
Pierre Laclede Center,
Suite 1500
7733 Forsyth Blvd.
St. Louis, MO 63105-1821
Mary B. Harmon, as 187,873 21.6%
personal representative
of the estate of
Douglas A. Harmon
1447 Tahiti Dr.
Sanibel, FL 33957
G.S. Beckwith Gilbert 100,000 11.5%
104 Field Point Road
Greenwich, CT 06830
Susan S. Aselage 28,903 3.3%
Jerry L. Leath 6,250 0.7%
Rodney E. Olson 7,000 0.8%
Bob D. Hanks 9,000 1.0%
Gene L. Harbula 5,000 0.6%
Arthur H. Fredston 462,458(1) 53.1% (1)
Winthrop, Stimson,
Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
All directors and 814,234(2) 92.2%
executive officers as a
group
(1) Mr. Lamoreux and Mr. Fredston, a Director of the
Company, are voting trustees pursuant to a voting trust
agreement relating to the 462,458 shares held by a trust,
of which Mr. Lamoreux is the sole beneficiary. The voting
trust agreement may be terminated at any time by Mr.
Lamoreux, and Mr. Fredston may resign at any time as a
voting trustee. Accordingly, Mr. Fredston disclaims
beneficial ownership of the 462,458 shares subject to such
agreement.
(2) Includes 9,500 exercisable options and 2,000 options
exercisable within 60 days of August 31,1996.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company retained the law firm of Winthrop, Stimson,
Putnam & Roberts during fiscal 1996 and 1995. Arthur H.
Fredston, a director of the Company, is a partner in such
firm.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this report:
Page
Number
in this
Report
(1) Financial Statements:
Report of Independent Auditors F1
Consolidated Balance Sheets - as of F2-F3
June 30, 1996 and 1995.
Consolidated Statements of Operations - F4
Years ended June 30, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' F5
Equity - Years ended June 30, 1996, 1995
and 1994.
Consolidated Statements of Cash Flows - F6
Years ended June 30, 1996,1995 and 1994.
Notes to Consoldiated Financial Statements. F7-F19
(2) Financial Statement Schedules:
No schedules have been filed since either they are not
required, they are not applicable, or the required
information is shown in the Consolidated Financial
Statements or in Notes to Consolidated Financial
Statements.
(3) Exhibits:
Exhibit Description
Number
3(1) Certificate of Incorporation of Sabreliner
Corporation dated June 15, 1983 (Filed with the
Registration Statement on Form S-4, Registration
Number 33-67422, by Sabreliner Corporation on
August 16, 1993.)
3(2) Certificate of Amendment of the Certificate
of Incorporation of Sabreliner Corporation dated
July 27, 1984 (Filed with the Registration
Statement on Form S-4, Registration Number 33-
67422, by Sabreliner Corporation on August 16,
1993.)
3(3) Certificate of Amendment of the Certificate
of Incorporation of Sabreliner Corporation dated
September 4, 1986 (Filed with the Registration
Statement on Form S-4, Registration Number 33-67422,
by Sabreliner Corporation on August 16, 1993.)
3(4) By-laws of Sabreliner Corporation (Filed
with the Registration Statement on Form S-4,
Registration Number 33-67422, by Sabreliner
Corporation on August 16, 1993.)
4(1) Indenture dated as of June 25, 1993 between
Sabreliner Corporation and IBJ Schroder Bank &
Trust Company, as Trustee, with respect to
Sabreliner Corporation's 12 1/2% Senior Notes due
2003, Series A, and Sabreliner Corporation's
12 1/2% Senior Notes due 2003, Series B (Filed with
the Registration Statement on Form S-4,
Registration Number 33-67422, by Sabreliner
Corporation on August 16, 1993.)
4(2) Purchase Agreement dated as of June 18, 1993
between Sabreliner Corporation and each Purchaser
referred to therein relating to the Units
referred to therein, in the form executed by each
Purchaser (Filed with the Registration Statement
on Form S-4, Registration Number 3367422, by
Sabreliner Corporation on August 16, 1993.)
4(3) Registration Rights Agreement dated as of
June 25, 1993 among Sabreliner Corporation and
the purchasers of Sabreliner Corporation's 12 1/2%
Senior Notes due 2003, Series A (Filed with the
Registration Statement on Form S-4, Registration
Number 33-67422, by Sabreliner Corporation on
August 16, 1993.)
4(4) Warrant Agreement dated as of June 25, 1993
between Sabreliner Corporation and IBJ Schroder
Bank & Trust Company, as Warrant Agent, with
respect to Sabreliner Corporation's Warrants to
purchase 1.1111 shares of its Common Stock (Filed
with the Registration Statement on Form S-4,
Registration Number 33-67422, by Sabreliner
Corporation on August 16, 1993.)
4(5) Financing Agreement, dated as of February 13,
1995, between Star Bank, National Association and
Sabreliner Corporation and its subsidiaries,
Midcoast Aviation, Inc. and Midcoast-Little Rock
(filed on Form 10Q, Registration Number 33-67422,
by Sabreliner Corporation on February 14, 1995)
4(6) First Amendment to Financing Agreement between
Star Bank, National Association and Sabreliner
Corporation, Midcoast Aviation, Inc., and
Midcoast Little Rock, Inc. dated as of November 10,
1995 (filed on Form 10-Q, Registration Number 33-
67422, by Sabreliner Corporation on November 14,
1995)
4(7) Second Amendment to Financing Agreement
between Star Bank, National Association and
Sabreliner Corporation, Midcoast Aviation, Inc.,
Midcoast-Little Rock, Inc. and SabreTech, Inc.
dated as of January 26,1996 (filed on Form 10-Q,
Registration Number 33-67422, by Sabreliner
Corporation on February 14, 1996)
9 Voting Trust Agreement dated March 25, 1993,
between F. Holmes Lamoreux and Arthur H. Fredston,
as voting trustee, relating to 462,458 shares of
Sabreliner Corporation's Common Stock held by a
trust of which Mr. Lamoreux is the sole beneficiary
(Filed with the Registration Statement on Form S-4,
Registration Number 33-67422, by Sabreliner
Corporation on August 16, 1993.)
10(1) Undergraduate Naval Flight Officers Contract with
the United States Navy awarded to Sabreliner
Corporation on March 6, 1990 (Filed with
the Registration Statement on Form S-4,
Registration Number 33-67422, by Sabreliner
Corporation on August 16, 1993.)
10(2) C-20 Contractor Logistics Support Contract with
the United States Air Force awarded to Sabreliner
Corporation July 21, 1995 (filed with Form 10-K
Registration Number 33-67422, by Sabreliner
Corporation on September 28, 1995)
10(3) Sublease Agreement dated June 25, 1990 between
Pegasus I, L.P., as sublessor, and Sabreliner
Corporation as sublessee (Filed with Registration
Statement on Form 8-4, Registration Number
33-67422, by Sabreliner Corporation on August
16, 1993.)
10(4) Lease Agreement dated December 17, 1986,
as amended February 7, 1990, June 25, 1990 and
April 17, 1995 between Sabreliner Corporation, as
lessee, and the City of Perryville, Missouri, as
lessor.
10(5) Lease Agreement dated July 28, 1992, between
Midcoast Aviation, Inc., as lessee, and the
Bi-State Development Agency of the Missouri
Illinois Metropolitan District, as lessor, for two
parcels east of hangar 9 at St. Louis Downtown-
Parks Airport (filed with Form 10-K Registration
Number 3367422, by Sabreliner Corporation on
September 28, 1995)
10(6) Lease Agreement dated March 23, 1984, as
amended April 20, 1990, and July 2, 1990, between
Midcoast Aviation, Inc., as lessee, and the Bi-State
Development Agency of the Missouri-Illinois
Metropolitan District, as lessor, for 8.33 acres of
land located at St. Louis Downtown-Parks Airport
(filed with Form 10-K Registration Number 33-67422,
by Sabreliner Corporation on September 28, 1995)
10(7) Lease Agreement dated June 1, 1984,between Midcoast
Aviation, Inc., as lessee, and the Bi-State
Development Agency of the Missouri Illinois
Metropolitan District, as lessor, for hangar 12
located at St. Louis Downtown Parks Airport (filed
with Form 10-K Registration Number 33-67422, by
Sabreliner Corporation on September 28, 1995)
10(8) Lease Agreement dated November 7, 1979,
as amended February 9, 1981, April 20, 1990, July
1, 1990, and November 22, 1994, between Midcoast
Aviation, Inc., as lessee, and the Bi-State
Development Agency of the Missouri-Illinois
Metropolitan District, as lessor, for hangar 7 land
and building located at St. Louis Downtown Parks
Airport (filed with Form 10-K Registration Number
33-67422, by Sabreliner Corporation on September
28, 1995)
10(9) Contract for Provision of Line Service dated
August 1, 1988 as amended May 8, 1991, between
Midcoast Aviation, Inc., as operator, and
the Bi-State Development Agency of the Missouri
Illinois Metropolitan District, as agency, located
at St. Louis Downtown-Parks Airport (filed with
Form 10-K Registration Number 33 67422, by
Sabreliner Corporation on September 28, 1995)
10(10) Terminal Building Lease Agreement, dated
December 4, 1991, between Midcoast Aviation, Inc.,
as lessee, and the BiState Development Agency of
the Missouri Illinois Metropolitan District, as
lessor, located at St. Louis DowntownParks Airport
(filed with Form 10-K Registration Number 3367422,
by Sabreliner Corporation on September 28, 1995)
10(11) Lease Agreement dated March 1, 1985, as
amended May 16, 1988, June 5, 1989, July 15, 1992,
September 28, 1992 and November 30, 1994, between
DynAir Tech, Inc., as lessee, and City of Phoenix,
as lessor, located at Phoenix Sky Harbor
International Airport (filed with Form 10-K
Registration Number 33-67422, by Sabreliner
Corporation on September 28, 1995)
10(12) Stock Purchase Agreement Between
Sabreliner Corporation and Trans World Airlines,
Inc. dated as of October 31, 1994 (filed on
Form 10-Q, Registration Number 33 67422, by Sabreliner
Corporation on November 14, 1994)
10(13) Stock Purchase Agreement Among
Sabreliner Corporation, DynCorp and DynCorp
Aviation Services, Ind. dated as of June 30, 1995
(filed on Form 8-K, Registration Number 33-67422,
by Sabreliner Corporation on July 14, 1995)
10(14) Employment Agreement dated August 18,
1994 between Sabreliner Corporation and Jerry L.
Leath (filed on Form 10-K, Registration Number 33
67422, by Sabreliner Corporation on September 27,
1994)
10(15) 1994 Stock Option Plan of Sabreliner
Corporation (filed with Form 10-K Registration
Number 33-67422, by Sabreliner Corporation on
September 28, 1995)
21 Subsidiaries of Registrant
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the quarter ended June 30, 1996.
(c) Exhibits Filed
A listing of exhibits required to be filed is given in the
Sequential Exhibit Index.
(d) Financial Schedules
The information regarding Financial Statement Schedules in
this item is provided in Item 14 (a) 1 and 2.
Report of Independent Auditors
The Board of Directors and Stockholders
Sabreliner Corporation
We have audited the accompanying consolidated balance sheets of
Sabreliner Corporation as of June 30, 1996 and 1995, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period
ended June 30, 1996. These financial statements are the
responsibility of Sabreliner Corporation's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Sabreliner Corporation at June 30, 1996
and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
August 28, 1996
St. Louis, Missouri
Sabreliner Corporation
Consolidated Balance Sheets
June 30
1996 1995
(In Thousands Except
Share and Per Share
Data)
Assets
Current assets:
Cash and cash equivalents $12,254 $ 9,879
Accounts receivable:
Commercial (net of allowances
of $962 in 1996 and $1,089 in 1995) 21,619 16,416
Government 7,733 7,960
Inventories 24,669 25,769
Contracts in process (net of
customer advances and progress
payments of $10,940 in 1996
and $10,373 in 1995) 11,917 9,474
Income taxes receivable 1,927 647
Deferred tax asset 3,310 2,941
Prepaid and other assets 1,897 1,193
Total current assets 85,326 74,279
Property and equipment (net of
accumulated depreciation of $96,235
in 1996 and $86,856 in 1995) 48,311 54,042
Goodwill (net of amortization of $239
in 1996 and $98 in 1995) 4,984 1,958
Deferred financing costs and other
assets 5,997 5,576
Total assets $144,618 $135,855
Sabreliner Corporation
Consolidated Balance Sheets
June 30
1996 1995
(In Thousands Except
Share and Per Share
Data)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $20,152 $12,324
Accrued compensation 6,389 6,155
Customer deposits 238 1,338
Other accrued liabilities 4,706 5,734
Deferred contract revenue and cost - 904
Royalties payable 2,300 -
Accrued interest expense 1,959 1,976
Current portion of long-term debt 916 448
and capital leases
Total current liabilities 36,660 28,879
Long-term debt and capital leases 93,999 92,766
Other long-term liabilities 2,000 4,041
Deferred income taxes 1,823 316
Stockholders' equity (shares and par
value as stated):
Common stock, $.01 par value,
2,000,000 shares authorized;
955,750 shares issued 10 10
Additional paid-in capital 2,056 2,056
Retained earnings 9,077 8,707
11,143 10,773
Less treasury stock, at cost
84,916 shares in 1996: 77,916
shares in 1995) (1,007) (920)
Total stockholders' equity 10,136 9,853
Total liabilities and stockholders'
equity $144,618 $135,855
See accompanying notes.
Sabreliner Corporation
Consolidated Statements of Operations
Year ended June 30
1996 1995 1994
(In Thousands Except Share and
Per Share Data)
Net revenue $205,633 $120,908 $103,786
Cost of revenue 171,045 91,867 79,626
Gross margin 34,588 29,041 24,160
Selling, general and
administrative expense 22,956 17,251 14,655
Operating income 11,632 11,790 9,505
Other income (expense):
Interest (11,789) (11,123) (11,459)
Litigation settlement - _ (7,613)
Other 877 481 33
(10,912) (10,642) (19,039)
Earnings (loss) before
income taxes 720 1,148 (9,534)
Income tax (expense) benefit (350) (350) 3,651
Net income (loss) $ 370 $ 798 $(5,883)
Earnings (loss) per share $0.42 $ 0.91 $ (6.66)
Average number of common and
common equivalent shares
outstanding 872,491 881,084 882,834
See accompanying notes.
Sabreliner Corporation
Consolidated Statements of Stockholders'Equity
June 30, 1996
Number of Shares Amounts (In Thousands)
Common Treasury Common Paid-In Retained Treasury
Stock Stock Stock Capital Earnings Stock
Balances 955,750 114,116 $ 10 $1,933 $13,799 $(1,119)
at June
30, 1993
Treasury
stock sold
pursuant
to Stock
Option
Plan - (41,200) - 123 (7) 260
Net Loss - - - - (5,883) -
Balances
at June
30, 1994 955,750 72,916 10 2,056 7,909 (859)
Treasury
stock
purchased - 5,000 - - - (61)
Net Income - - - - 798 -
Balances
at June
30, 1995 955,750 77,916 10 2,056 8,707 (920)
Treasury
Stock
purchased - 7,000 - - - (87)
Net Income - - - - 370 -
Balances
at June
30, 1996 955,750 84,916 $ 10 $2,056 $ 9,077 $(1,007)
See accompanying notes.
Sabreliner Corporation
Consolidated Statements of Cash Flows
Year ended June 30
1996 1995 1994
(In Thousands Except Share and
Per Share Data)
Operating Activities
Net income (loss) $ 370 $ 798 $(5,883)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and 11,888 23,972 22,099
amortization
Changes in assets and
liabilities:
Accounts receivable (4,183) 12,089 (8,421)
Inventories 1,399 (1,524) 7,660
Contracts in process (2,041) (2,704) (2,126)
Prepaid expenses and
other assets 545 (1,033) (27)
Accounts payable 6,183 (6,110) 2,727
Customer deposits (1,248) (40) 13
Deferred contract revenue
and cost (904) (3,806) (3,111)
Accrued liabilities (1,600) (1,484) 1,508
Accrued income taxes 173 (120) (3,110)
Total adjustments 10,212 19,240 17,212
Net cash provided by 10,582 20,038 11,329
operating activities
Investing activities
Capitalized expenditures (4,346) (3,788) (5,568)
Acquisitions, net of cash (3,008) (28,069) -
acquired
Net cash used in investing (7,354) (31,857) (5,568)
activities
Financing activities
Dividend payment - - (9,932)
Principal payments on long- (600) (170) (60)
term borrowings
Debt issuance costs (166) (347) -
Sale of treasury stock - - 375
Purchase of treasury stock (87) (61) -
Net cash used by financing
activities (853) (578) (9,617)
Increase (decrease) in cash 2,375 (12,397) (3,856)
Cash and cash equivalents at 9,879 22,276 26,132
beginning of year
Cash and cash equivalents at $12,254 $ 9,879 $22,276
end of year
Supplemental cash flow
information
Interest paid $11,775 $11,794 $ 9,454
Taxes paid $ 63 $ 1,970 $ 1,043
Capitalized expenditures and debt proceeds shown in 1995 exclude
capital leases of $1.2 million.
See accompanying notes.
1. Nature of Business
Sabreliner is a diversified aerospace company providing
services in airframe maintenance and modification, gas
turbine engine overhaul and repair, logistics support and other
aerospace products and services for commercial, corporate
and government aviation markets. During fiscal 1996, 40% of
the Company's revenue was provided by commercial aviation,
33% was provided by corporate aviation and the remaining 27%
was provided by the government aviation business.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the assets,
liabilities and operations of Sabreliner Corporation and its
wholly owned subsidiaries, Midcoast Aviation, Inc.,
SabreTech, Inc. and Turbotech Repairs, Inc. Intercompany items
and transactions have been eliminated in the preparation
of these statements, including unrealized intercompany
profits and losses.
The preparation of 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. Earnings reported for certain major
long-term contracts are predicated upon estimates of probable
outcome by management. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash equivalents consist of short-term highly liquid
investments purchased with a maturity of three months or less.
Inventories
Corporate aviation inventories are valued at the lower of
average cost or market. Inventory costs include the
appropriate elements of material, labor, and manufacturing
overhead. Commercial aviation inventories are valued at the lower
of first-in, first-out (FIFO) cost or market. Provision is
made for excess aircraft parts based upon historical usage
and known future requirements. Obsolete and unusable materials
are physically removed from inventory stores in accordance with
FAA guidelines and periodic condition inspections.
In accordance with trade practice, aircraft parts inventory is
included in current assets. In certain specific instances,
some portion of the aircraft parts are carried for estimated
service requirements that exceed one year.
Revenue Recognition
Revenues on contracts are recognized under the percentage of
completion method. Progress is based on contract costs
incurred to date compared to total estimated contract costs or
man-hours incurred to date compared to total estimated man
hours. Earnings expectations are based upon estimates of
contract values and costs. Contracts in process are reviewed
on a periodic basis with adjustments to revenues and earnings
made in the current accounting period based upon revisions in
contract value and estimated costs at completion. Provisions
for estimated losses on contracts are recorded when identified.
Contract payments received in advance of services to be
provided are deferred and recognized over the term of the
contract as the services are performed. Service contracts
include training services and on-site contractor spares,
maintenance and technical support.
Contracts in Process
Contracts in process represent accumulated costs and
estimated earnings thereon based upon the percentage of
completion of undelivered customer orders. The contracts in
process balance reflects the actual costs incurred, net of
applicable customer advance payments, and include: direct
engineering, production, tooling, applicable overhead and other
costs (excluding general and administrative costs which are
charged against income as incurred). Contracts in process do
not include any significant amounts of costs, claims or
similar items subject to uncertainty concerning their
realization. Title to or a security interest in certain
items included in contracts in process is vested in the U.S.
Government by reason of progress payment provisions of related
contracts. In accordance with industry standards, contracts
in process related to long-term contracts are classified as
current assets even though a portion may not be realized within
one year.
Property and Equipment
Property and equipment are stated at acquisition cost.
Significant additions or improvements which extend asset lives
are capitalized; repair and maintenance costs are expensed as
incurred. Capital leases are recorded at the lower of fair
market value or the present value of future minimum lease
payments. These leases are amortized over the life of the
lease. Leasehold improvements are amortized over the term of
the respective lease or the estimated useful life of the
improvement, whichever is shorter. Buildings and equipment are
depreciated over the estimated useful life of each asset.
Service contract assets composed of retrofitted aircraft, flight
simulators and engines utilized on the UNFO contract, less
salvage value, are depreciated over the basic contract
life (50 months), exclusive of option periods. All
depreciable property and equipment are depreciated using
the straight-line method.
Goodwill
The Company has recorded a value for goodwill arising out of
purchase cost in excess of fair value of tangible assets
acquired in the purchase of Midcoast Aviation, Inc. and
SabreTech, Inc. Goodwill is amortized on a straight-line
basis over 15 years. In accordance with FASB Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long Lived Assets to Be Disposed Of," the Company records
impairment losses on such long-lived assets when events and
circumstances indicate that the assets might be impaired and
the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.
Income Taxes
Income tax expense is based upon reported income and
expense, adjusted for permanent differences between income
reported for financial statement purposes and taxable
income. Deferred income taxes are provided using the
liability method for items of revenue and expense recognized in
different periods for financial and income tax reporting.
The Company adopted the provisions of FAS 109 "Accounting for
Income Taxes" during fiscal 1994 without any material effect
to the Company's financial position.
Earnings Per Share
Earnings per share of common stock are calculated by
dividing net earnings by the weighted average number of
common shares outstanding during each year plus, when their
effect is dilutive, common stock equivalents consisting of
certain shares subject to stock options and warrants.
3. Acquisitions
On May 23, 1996, the Company acquired the tooling,
inventories and license for the AlliedSignal TFE 731 engine
heavy maintenance product line from UNC-Airwork for $2.0
million. Payments for the tooling and license of $0.5
million were made during fiscal 1996; remaining amounts owed for
inventories of $1.5 million are subject to a financing
agreement payable on the first anniversary of the purchase
date. No goodwill was recorded. Revenues recorded by
UNCAirwork in the last twelve months for this product line
were in excess of $10 million.
On June 27, 1996, the company paid $1.0 million to acquire
100% of the outstanding stock and retire outstanding debt owed
investors of Turbotech Repairs, Inc., an engine component
repair and authorized maintenance center for certain
engine manufacturers. During fiscal 1997, the Company will
be required to make full payment on certain revolving term
and trade credit facilities initiated by Turbotech prior to
the acquisition of $1.6 million, resulting in a total
purchase price of $2.6, million exclusive of mortgage debt
kept in place of $1.4 million. Total assets as of the date
of acquisition were $4.6 million. No goodwill was recorded.
Revenues in the twelve months prior to acquisition were $5.9 million.
On June 30, 1995, the Company acquired the DynAir Companies, now
known as SabreTech, Inc. A base purchase price of $12.8 million
was paid during fiscal 1995, subject to an adjustment in
working capital asset values and continuing purchase costs of
$1.5 million, paid in fiscal 1996. In addition to this base
purchase price, the purchase price includes contingent payments
of 10% of SabreTech's annual revenues in excess of $60 million
reported for the Company's fiscal years 1996 and 1997.
The first installment of the contingent payments, estimated
at $2.3 million, has been recorded as a liability on the
June 30, 1996 balance sheet payable to DynCorp in fiscal
year 1997. The second and final installment of contingent
payments, due in fiscal 1998, will be recorded upon
determination of final fiscal 1997 revenues as an increase
to the purchase price of SabreTech. Goodwill arising out
of this transaction has been recorded at $3.4 million.
Revenues provided by the SabreTech acquisition during fiscal
1996 were $81.8 million.
On November 2, 1994, the Company acquired Midcoast Aviation,
Inc. for approximately $20 million. Assets as of the date of
acquisition were approximately $25 million, of which $2.0
million represented goodwill. Revenues provided by the
Midcoast acquisition for fiscal 1995 and 1996 were $25.0
million and $43.4 million, respectively.
4. Significant Customers
The Company sells its products and services to the U.S.
Government and to foreign and domestic private individuals,
corporations and governments. The Company performs periodic
credit evaluations of its customers' financial condition and the
results of these evaluations determine the amount of
prepayment, or other security, such as letters of credit,
which may be required. The June 30, 1996, commercial
receivable balance includes $2,972 due from ValuJet. The
Company expects full collection of this receivable within the
next year.
Foreign revenues amounted to approximately $14,279 in 1996,
$5,945 in 1995 and $6,800 in 1994.
Contract revenues from U.S. Government agencies amounted to
approximately $55,600 in 1996, $73,600 in 1995 and $74,399 in
1994. The largest of these contracts is the Undergraduate
Naval Flight Officer Training contract (UNFO). Contract
revenues for UNFO accounted for approximately $22,790 in
1996, $44,300 in 1995 and $46,800 in 1994.
During fiscal 1996, McDonnell Douglas accounted
for approximately $21,330 in commercial aviation revenues.
5. Inventories
Inventories consist of the following categories:
June 30
1996 1995
Aircraft parts $22,105 $21,515
Assembly parts in process 1,419 1,130
Aircraft held for resale 1,145 3,124
$24,669 $25,769
6. Property and Equipment
The major categories of property and equipment consist of the
following:
June 30
1996 1995
Land and buildings $ 4,053 $ 2,500
Leasehold improvements 17,299 17,768
Machinery and equipment 11,539 12,011
Tools, dies and jigs 4,243 4,108
Furniture and other equipment 4,797 3,216
Service contract assets 99,118 98,801
141,049 138,404
Less accumulated depreciation (96,235) (86,856)
44,814 51,548
Construction-in-progress 3,497 2,494
$48,311 $54,042
7. Long-Term Debt and Capital Leases
Long-term debt and capital leases consist of the following:
June 30
1996 1995
12.5% Senior Notes Due in 2003 $88,740 $88,560
Revolving credit - -
Mortgage notes 4,054 2,825
Capital leases 1,189 1,179
Other 932 650
94,915 93,214
Less current portion (916) (448)
$93,999 $92,766
Senior Notes
On June 28, 1993, the Company issued $90,000 of 12.5 percent
Senior Notes (Notes) due April 15, 2003, and detachable
Warrants entitling Warrant holders to purchase an aggregate of
94,444 shares of Common Stock. The net proceeds of $89,900
were allocated on a fair value basis between long term debt
and Warrants.
The Warrants have an exercise price of $25.00 per share, and are
exercisable on or after June 25, 1998, on or after the
occurrence of a Triggering Event, as defined in the Warrant
Agreement governing the Warrants, or in connection with the
voluntary or involuntary dissolution of the Company.
The Notes, which are publicly registered, are senior,
unsecured obligations of the Company and rank "pari passu" in
right of payment with all other existing and future
unsecured senior indebtedness of the Company, and are senior in
right of payment to all existing and future subordinated
obligations. Interest on the Notes is payable semi-
annually.
The Indenture under which the Notes were issued contains
several covenants, including interest coverage and the
incurrence of additional debt. Should the Company not meet the
annually measured Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) coverage ratio as
identified in the Indenture, the Company will be required to
offer to repurchase ten percent of the outstanding Notes. The
Indenture also restricts the payment of dividends by limiting
the percentage of consolidated net income eligible for dividends
and requiring the EBITDA coverage ratio to be at
least 2.5. In the event of a Change of Control, as defined
in the Indenture, the Company is required to offer to purchase all
outstanding Notes at a purchase price equal to 101 percent of the
principal amount thereof plus accrued interest to the Change of
Control purchase date.
The Notes are not redeemable at the option of the Company prior
to May 1, 1998. On or after that date, the Notes are redeemable
at the option of the Company, in whole or in part any time, at a
premium which declines annually.
Revolving Credit
The Company and its subsidiaries, Midcoast Aviation, Inc. and
Midcoast-Little Rock, entered into a financing agreement with Star
Bank of Cincinnati, Ohio, to establish a secured revolving credit
and letter of credit facility in 1995. The facility provides a
three-year renewable line of credit, secured by inventory,
accounts receivable and general intangibles. During fiscal 1996,
the credit facility was amended to include SabreTech and increase
borrowing limits. The Company has available, on a discretionary
basis, the lesser of $35 million or the amount determined under
a borrowing base formula. Included in this credit agreement are
covenants which require the Company to maintain certain interest
coverage, equity values, and other performance criteria
throughout the term of the financing agreement.
Mortgage Notes
The Company kept in place the mortgage note owed to
Jefferson Bank and Trust as part of its acquisition of
Midcoast Aviation, Inc. The mortgage is secured by leasehold
improvements at the St. Louis Downtown Parks facility. The interest
rate on this note is fixed for three year periods throughout the
note's life, using one-half percent over the bank's prime rate.
The current rate, until the next adjusting period, starting
January, 1997, is 6.5%. The monthly payment, fixed for a term
coinciding with interest rate redetermination, is $31.
The Note matures on December 26, 1999.
As part of its acquisition of Turbotech Repairs, Inc., the Company
kept in place two mortgage notes totaling $1.4 million,
secured by real property and buildings. The largest of these
notes is owed to Union Bank, with principal value of $782. The
interest rate on the note is equal to the bank's CD
rate plus two percent. The principal portion of the monthly
payment is a fixed amount and the Note matures on March 1, 2005.
The remaining mortgage is owed to the Small Business
Administration. The interest rate on this note is fixed at 7.7%
per annum and the note matures on June 1, 2015. Combined monthly
payments made under these mortgages, estimated under current
interest rates are $13.
Capital Leases
During fiscal year 1995, the Company entered into capital leases
for both the purchase of a mainframe information
system and transportation equipment. As of June 30, 1996, these
assets (included in property and equipment) totaled $1,031, net
of accumulated depreciation of $11. During fiscal year 1996,
the Company kept in place $253 in capital equipment leases as a
result of the acquisition of Turbotech Repairs, Inc. Annual lease
payments under capital leases for the years ended June 30, 1997
through 2001, are $406, $419, $404, $314 and $131, respectively.
Aggregate maturities of long-term borrowings and capital
leases are as follows:
1997 $ 916
1998 861
1999 688
2000 546
2001 395
Thereafter 91,509
$94,915
8. Lease Commitments, Rent Expense and Rental Revenues
The Company has lease commitments (both income and expense)
expiring at various dates, principally for real property and
office equipment. Income leases are primarily subleases and
offset lease commitments.
Future minimum lease payments and rental revenues under
noncancellable, operating leases are as follows:
Total Total
Lease Income Net
Payments Leases Commitments
Years Ended June 30
1997 $ 4,508 $(2,379) $ 2,129
1998 4,355 (959) 3,396
1999 4,212 (219) 3,993
2000 3,707 (13) 3,694
2001 and thereafter 18,766 (50) 18,716
Total $35,548 $(3,620) $31,928
Rent expense for operating leases totaled $6,179 in 1996,
$1,726 in 1995, and $1,646 in 1994. Rental revenue totaled
$3,493 in 1996, $1,362 in 1995, and $1,141 in 1994.
9. Benefit Plans
Pensions
The Company has three hourly pension plans
covering substantially all non-salaried union employees.
Pension benefits are based on the employee's length of
service and defined benefit rates. Normal service costs
are funded currently using the projected unit credit
method.
Net periodic pension expense for 1996, 1995, and 1994 is
comprised of the following:
1996 1995 1994
Service cost $192 $185 $207
Interest cost on projected 387 340 312
benefit obligation
Return on plan assets (842) (860) (35)
Amortization of unrecognized
net assets and deferral 348 430 (414)
Net periodic pension expense $ 85 $ 95 $ 70
The following table sets forth the funded status of these
three plans:
1996 1995
Plan assets at fair value, primarily $6,272 $5,526
stock and bond funds
Actuarial present value of benefit
obligations:
Vested 4,570 4,060
Nonvested 766 636
Projected benefit obligation 5,336 4,696
Plan assets in excess of projected 936 830
benefit obligation
Unrecognized net (gain) or loss from
past experience different from that
assumed and effects of changes in (702) (419)
assumptions
Prior service cost not yet recognized
in net periodic pension costs 374 241
Unrecognized net asset at June 30, 1987
being recognized over 12 years (129) (188)
Prepaid pension cost $ 479 $ 464
The discount rate used to develop net pension expense was 8.0
percent in 1996, 8.0 percent in 1995 and 8.25
percent in 1994. The expected long-term rate of return on retirement
plan assets for 1996, 1995 and 1994 was 8.7 percent, 8.6 percent
and 8.8 percent, respectively.
Savings Plans
The Company maintains savings plans for salaried personnel and
nonunion hourly employees. Under the provisions of one of the
savings plans the Company makes contributions based upon
employee voluntary contributions and eligible
compensation. The Company's cost was $678 in 1996, $662 in
1995 and $702 in 1994.
Stock Option Plans
The Company has two incentive stock option plans for
officers and key employees. A summary of stock option
activity follows:
Per Share Data
1996 1995 1994
Outstanding at beginning 10,900 2,400 43,600
of year
Granted 16,000 13,500 -
Exercised - - (41,200)
Canceled (1,500) (5,000) -
Outstanding at end of 25,400 10,900 2,400
year
As of June 30, 1996, 5,650 options are exercisable at prices
ranging from $10.46 to $22.64 per share. The remaining
19,750 options, which were granted at exercise prices
ranging from $10.46 per share to $12.84 per share become
exercisable as follows: 9,875 in 1997; 6,000 in 1998 and
3,875 in 1999. The plans are authorized to grant up to
175,500 additional options.
FAS 123, "Accounting for Stock-Based Compensation," which
established financial accounting and reporting standards for
stock-based employee compensation plans, was issued in
October, 1995 and is effective for years beginning after
December 15, 1995. The Company will comply with this
standard in fiscal year 1997. Alternatives available within
the standard are being evaluated to determine the method to be
adopted.
Postretirement Benefits
A select group of retired employees are provided
medical insurance on a continuing basis. The plan is
contributory, with retiree contributions adjusted
periodically, and contains other cost-sharing features, such as
deductibles and co-insurance. The Company's policy is to fund
the cost of medical benefits as incurred. The accrued
postretirement benefit cost as of June 30, 1996 and 1995, was
$1.1 million.
The continuing cost of covered health care benefits is
expected to increase 12 percent each year through 2000, with
increases expected to gradually decrease to 6 percent by the
year 2006 and remain constant thereafter. The effect of a one
percentage point increase in the assumed health care trend
rate in the projected liability at June 30, 1996 is $88. The
discount rate used to determine the accumulated postretirement
benefit obligations as of June 30, 1996 was 8.25 percent.
10. Income Taxes
Components of the provision for income taxes attributable to
continuing operations are as follows:
1996 1995 1994
Current $1,098 $(667) $ 860
Deferred (1,448) 317 2,791
Total (expense) benefit $(350 $(350) $3,651
The reconciliation of income tax attributable to continuing
operations computed at the U.S. federal statutory tax rates to
the effective income tax rates for 1996, 1995 and 1994 is as
follows:
1996 1995 1994
Expected statutory rate 34.00% 34.00% (34.00)%
State income tax 4.10% 1.78% (2.02)%
Goodwill 6.60% (5.80)% (1.05)%
Foreign sales corporation (6.00)% (5.00)% (.26)%
Nondeductible expense 11.80% 4.10% .10 %
Other (1.90)% 1.48% (1.07)%
Effective rate 48.60% 30.56% (38.30)%
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
1996 1995
Deferred Tax Assets:
AMT credits $2,237 $ 1,772
Inventory reserves and UNICAP 1,777 1,503
Deferred contract revenue and cost - 369
Retirement benefits - FAS 106 355 403
Vacation accrual 409 656
Other 770 1,229
Total deferred tax assets $5,548 $5,932
Deferred tax liabilities:
Tax over book depreciation and $4,061 $3,130
accelerated contract costs
Other - 189
Total deferred tax liabilities 4,061 3,319
Net deferred tax asset $1,487 $2,613
No valuation allowance is considered necessary for the
remaining $1,487 million net deferred tax asset as management
believes it is more likely than not that the deferred tax
asset will be realized through future reversals of existing
taxable temporary differences against existing deductible
differences and projections of income on future periods.
The Company is subject to the alternative minimum tax (AMT)
system for income tax purposes. The Company began fiscal
1996 with $1,772 in AMT credit carryforwards, which carry
forward indefinitely. An additional AMT credit carryforward was
generated in 1996, resulting in a total AMT credit
carryforward of $2,237 at June 30, 1996. In 1995, the
regular tax expense exceeded the AMT expense, resulting in
utilization of AMT credits of approximately $1,600.
11. Litigation and Contingencies
On May 11, 1996, ValuJet Flight 592 from Miami, carrying 110
passengers and crew crashed into the Florida Everglades.
Prior to take-off, employees of SabreTech's Miami facility
returned to ValuJet various company materials, including
five boxes containing oxygen generators, which, after
consultation with ValuJet's flight crew, were loaded into the
cargo bay of Flight 592 by ValuJet employees. Although the
cause of the crash has not been officially determined by the
National Transportation Safety Board (NTSB), SabreTech's actions
associated with Flight 592 have been included in the NTSB
investigation. The Federal Aviation Administration (FAA)
is also conducting an investigation into the circumstances
surrounding the ValuJet crash and has sought information from
SabreTech and various of its employees in connection therewith.
In addition, SabreTech is one of several subjects of an
investigation being conducted by a federal grand jury in
conjunction with the United States Attorney for the Southern
District of Florida. The Company cooperated fully
throughout these investigations and is continuing to do so.
Public hearings concerning the crash of Flight 592 are expected
to be held in November, 1996.
SabreTech, ValuJet and others have been named as defendants in
numerous wrongful death actions that have been filed by
families of the victims. Additional wrongful death actions are
expected to be filed. The legal cost of defending against
these civil actions and any possible claim settlements will be
funded by the Company's insurance policies. Management
believes coverage is adequate to provide for such legal actions.
SabreTech, ValuJet and others also have been named as
defendants in two class action lawsuits brought by
stockholders of ValuJet. The Company believes that it has
meritorious defenses in the two actions.
Costs associated with this incident, such as media
relations, incremental professional services, legal fees and
other costs related to the various investigations and other
lawsuits, of approximately $0.7 million were incurred in the
Company's fourth quarter. Additional costs incurred in
subsequent periods will be recognized as incurred. While the
ultimate outcome of the legal actions related to the ValuJet
Flight 592 crash and the length of time necessary to resolve
all the outstanding issues cannot be determined at this time,
the Company believes the continuing effects of the
investigations and related lawsuits will not have material
adverse effect upon the results of operations or financial
condition of the Company.
The Company has been subject to government inquiry regarding an
alleged environmental incident that may have occurred at the
Perryville facility prior to the flooding of the facility
in July, 1993. Requests for documents concerning this matter
were received during fiscal 1996. All requests for documents
have been complied with or are in the process of resolution
and no other significant actions or developments have occurred
during fiscal 1996.
In addition to the litigation discussed above, the Company
is subject to other legal proceedings and claims arising in
the ordinary course of its business. Although there can be
no assurance as to the outcome of such litigation, it is the
opinion of management (based upon the advice of
legal counsel) that all such actions or proceedings are covered
by insurance or will be resolved without material effect on
the Company's financial position or results of operations.
On December 30, 1993, the Company entered into a settlement
agreement with Hannon-Armstrong to resolve litigation
arising out of proposed financing in support of a Navy
contract awarded to Sabreliner. The settlement provided for the
payment of $7,613 to Hannon-Armstrong. Legal costs
incurred by the Company associated with this litigation in
fiscal year 1994 of $1,883 is included in general and
administrative expense.
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, as of September 27, 1996.
SABRELINER CORPORATION
By: /s/ F. Holmes Lamoreux
F. Holmes Lamoreux
Chairman of the Board of
Directors, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ F. Holmes Lamoreux Chairman of the September 27, 1996
F. Holmes Lamoreux Board of Directors,
President and Chief
Executive Officer
/s/ Jerry L. Leath Executive Vice September 27, 1996
Jerry L. Leath President and
Chief Operating
Officer
/s/ Rodney E. Olson Senior Vice September 27, 1996
Rodney E. Olson President, Finance
and Corporate
Development and
Chief Financial
Officer (principal
financial and
accounting officer)
/s/ Susan S. Aselage Vice President, September 27, 1996
Susan S. Aselage Secretary and
Assistant
Treasurer, and
Director
/s/ Arthur H. Fredston Director September 27, 1996
Arthur H. Fredston
/s/ Mary B. Harmon Director September 27, 1996
Mary B. Harmon
SEQUENTIAL EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit Number Description
10(4) Lease Agreement dated December
17, 1986 as amended February 7, 1990, June 25,
1990 and April 17, 1995 between Sabreliner
Corporation, as lessee, and the City of
Perryville, Missouri, as lessor.
21 Subsidiaries of Registrant
EXHIBIT 10(4)
LEASE AND AGREEMENT
This Lease and Agreement is made and entered into this
17th day of December, 1986, by and between CITY OF PERRYVILLE,
MISSOURI, a municipal corporation located in the County of Perry,
State of Missouri, hereinafter referred to as "CITY", and
SABRELINER CORPORATION, a business corporation of the State of
Delaware, hereinafter referred to as "SABRELINER".
WHEREAS, the parties hereto desire to extend and modify
previous Lease Agreement entered into by and between the parties
concerning real estate and improvements leased by SABRELINER at
the Perryville Municipal Airport located near the village of
McBride, Missouri; and,
WHEREAS, the parties are desirous of continuing the
arrangement with certain modifications to which the parties have
agreed; and,
WHEREAS, the parties desire to memorialize their agreement
in writing.
NOW, THEREFORE, in consideration of the mutual covenants
and conditions hereinafter set forth, the sufficiency of which is
hereby acknowledged by the parties hereto, the parties hereto
covenant and agree as follows:
1. PREMISES. The CITY hereby demises and leases to SABRELINER
for use in its business as a fixed base operator maintaining and
servicing aircraft at the Perryville Municipal Airport
(hereinafter referred to as AIRPORT), the following described
real estate:
Part of U.S. Survey 1866, Township 37 North, Range 11 East
and part of U.S. Survey 3162, Township 36 North Range 11
East of the Fifth Principal Meridian, Perry County,
Missouri, and being more particularly described as follows:
Beginning at a point on the line between said township from
which the Northeast corner of said Survey 3162 bears East
560.00 feet; thence leaving said Township line South 42 00'
00" East 710 feet; thence South 48 00' 00" West 740.00 feet;
thence South 3 00' 00" West 100.00 feet to the North right-
of-way of State Highway "H"; thence along said right-of-way
North 87 00' 00" West 130.00 feet; thence leaving said right-
of-way North 3 00' 00" East 140.00 feet; thence North 42 00'
00" West 480.00 feet; thence South 48 00' 00" West 320.00
feet; thence North 42 00' 00" West 659.79 feet;thence North
48 00' 00" East 788.64 feet; thence North 42 00' 00" West
80.00 feet; thence North 48 00' 00" East 130.00 feet; thence
South 42 00' 00" East 80.00 feet; thence North 48 00' 00"
East 475.00 feet; thence South 42 00' 00" East 480.00 feet;
thence South 48 00' 00" West 270.00 feet; thence South 42
00' 00" East 70.00 feet to the point of beginning and
containing 31.58 acres.
The aforesaid premises leased to SABRELINER hereby include all
improvements now existing on the above described real estate,
less reservations for use by the CITY and public as hereinafter
set forth.
2. RESTRICTIONS ON USE AS A FIXED BASE OPERATOR LOCATED
AT THE PERRYVILLE MUNICIPAL AIRPORT. SABRELINER shall have use
of the runways and aprons located at the AIRPORT, however, use of
said public aprons and areas by SABRELINER shall never interfere
directly or indirectly with the use of the AIRPORT by the general
public.
3. TERM. The term of this Lease and Agreement shall be
for a period of ten (10) years commencing the 1st day of
November, 1986 and terminating the 31st day of October, 1995. The
City grants Sabreliner the right to renew this lease in
accordance with the terms hereof and at the 1995 rental figure
for an additional 10 years commencing on July 1, 1996, at
Sabreliner's option by giving sixty (60) days prior written
notice to the City of its intent to do so before the expiration
of this Agreement.
4. RENT. SABRELINER shall pay to the CITY for the term
hereof the sum of Three Hundred Twenty Six Thousand One Hundred
Eighty Dollars ($326,180.00) to be payable in yearly installments
on July 1st of each year in amounts set forth as follows:
July 1, 1986 $l6,000.00
July 1, 1987 $l6,000.00
July 1, 1988 $16,000.00
July 1, 1989 $32,000.00
July 1, 1990 $32,000.00
July 1, 1991 $32,000.00
July 1, 1992 $45,545.00
July 1, 1993 $45,545.00
July 1, 1994 $45,545.00
July 1, 1995 $45,545.00
Said rents shall be paid to the City Clerk of the City of
Perryville on the date and in the amount aforesaid at City Hall,
City of Perryville, Missouri 63775.
5. NONEXCLUSIVE RIGHT. The CITY hereby grants to SABRELINER
the nonexclusive right to engage in business as a fixed base
operator maintaining and servicing aircraft at the AIRPORT, and
to operate on and use the AIRPORT in common with others, pursuant
to the CITY's interest in the AIRPORT, as such interest now
appears or may be acquired hereafter. Said business of
SABRELINER may include, but need not be limited to, the business
of the installation and operation of aviation fuel and oil
facilities, avionics, engine and aircraft repair and
modifications, sale and rental of aircraft, sale of aircraft
engines, parts and accessories, fabrication of aircraft
components, flight instruction, storage of aircraft and
equipment, aircraft charter flights and local short flights; and
SABRELINER may also provide pilots for aircraft for others, and
carry passengers and freight for hire, subject to all appropriate
laws of the federal government and the State of Missouri;
Ordinances of the CITY; and requirements of all duly authorized
governmental agencies.
6. AIRPORT SERVICES. SABRELINER shall have the right to
operate a restaurant at the AIRPORT and to engage an operator for
same. SABRELINER shall also have the right to operate a flight
school. CITY shall operate and maintain all runway, taxi, beacon
and marker lights now installed or to be installed in the future
at the AIRPORT in accordance with regulations of the Federal
Aeronautics Administration, hereinafter referred to as "FAA", or
other governmental agency, which includes operating said lights
all night if so required by the CITY or a government agency.
7. PUBLIC OPERATIONS. SABRELINER shall operate its
business as a fixed base operator at the AIRPORT for the use and
benefit of the public as required by law, and to that end shall
make available its facilities to the general public without
discrimination; shall furnish good, prompt and efficient service
adequate to meet all reasonable demand for its fixed base
operator service at the AIRPORT; shall furnish its said service
on a fair and equal basis, as required by law; provided that
SABRELINER may grant reasonable and different discounts, rebates,
or other similar types of price reductions to volume and other
purchasers, as allowed by law.
8. FACILITIES AND IMPROVEMENTS. SABRELINER shall have
the right to use and occupy improvements on the demised premises
subject to temporary use by the CITY or it's designates as
indicated herein. Title to all improvements now constructed or
to be constructed on the demised premises shall remain vested in
the CITY. SABRELINER shall have the option to construct at any
time during the rental term of this Lease and Agreement
additional hangars and improvements on the demised property
subject to approval of the CITY, which said approval shall not be
unreasonably withheld. Plans and specifications for any
improvement to be constructed on the demised premises shall be
provided to the City Engineer who shall review same prior to the
commencement of construction.
The CITY shall be responsible for operation of the AIRPORT, and
to that end shall maintain all publicly owned runways, taxiways,
aprons, and air navigation facilities now installed or to be
installed, in good working condition.
9. MAINTENANCE. SABRELINER shall maintain and keep in
serviceable condition, normal wear and tear and acts of God
excepted, the improvements located on the demised premises. In
addition, SABRELINER shall keep the grass mowed near the
improvements on the demised premises and shall provide normal
landscape maintenance. SABRELINER shall provide normal
maintenance of the sewage and water facilities located at the
AIRPORT; provided, however, that the CITY shall be solely
responsible for major repairs and replacement of sewer and water
lines and water pumps and for all other expenses related to said
sewage and water facilities which are not normal maintenance as
aforesaid.
10. FLOOD. In the case of flood, SABRELINER shall
participate on an equal basis with other fixed base operators at
the AIRPORT to a reasonable extent in cleaning up damage caused
by such flood, and in this task shall be assisted by the CITY on
an equal basis; provided, however, that such participation by
SABRELINER shall include putting all buildings affected by flood
back into serviceable condition, so long as only reasonable
amounts of labor are involved in doing the same, but shall not
include replacing any buildings destroyed by flood nor repairing
major damage, nor furnishing labor in connection with major
repairs or replacement of any buildings affected by flood.
11. DAMAGE AND DESTRUCTION. If improvements on the demised
premises shall be destroyed or damaged, in whole or in part, by
fire, wind, flood or acts of God, or the use thereof by
SABRELINER is suspended, restricted or otherwise interfered with
by said events, and said improvements can be reasonably restored
to the condition thereof immediately preceding such damage or
destruction within a period of sixty (60) days, all the terms and
covenants of this Lease and Agreement shall remain in full force
and effect during said reconstruction.
(a) In the event of damage or destruction of the
improvements on the demised premises to such an extent that they
cannot be reasonably restored to the condition thereof
immediately preceding such damage or destruction within a period
of sixty (60) days; or in the event SABRELINER will be prevented
by such damage or destruction from carrying on it's business as a
fixed base operator at the AIRPORT for a period of more than
sixty (60) days; or the cost of restoration of the improvements
on the demised premises would exceed the total amount of
insurance proceeds available to SABRELINER and/or the CITY
arising from such damage or destruction, then SABRELINER shall
have the right to terminate this Lease and Agreement as provided
herein.
(b) SABRELINER, after damage or destruction of
improvements at the AIRPORT, may elect to restore the facilities
and apply the proceeds of SABRELINER's and CITY's insurance
coverage to the repair or reconstruction costs of such
restoration. In the event the estimated cost of such restoration
of the improvements at the AIRPORT total an amount in excess of
the insurance proceeds payable to the CITY and/or SABRELINER
arising from such damage or destruction, and neither CITY nor
SABRELINER desires to pay such excess amount, then SABRELINER may
elect to receive such insurance proceeds and in connection
therewith cancel this Lease and Agreement as provided herein.
12. INSURANCE. SABRELINER shall keep in full and
effect at a11 times, public liability insurance with policy
limits in minimum amounts of $500,000.00/$1,000,000.00 for public
liability and $200,000.00 for property damage per occurrence.
Such policies shall be issued by a reliable insurance company or
companies, approved by the CITY. SABRELINER shall hold the CITY
harmless and shall indemnify CITY for any and all claims for
damages, for death or injuries to persons, or for property damage
arising out of SABRELINER's use and maintenance of the
improvements on the demised premises. SABRELINER shall carry
fire and extended coverage insurance on all improvements
constructed or to be constructed in the future in an amount equal
to the replacement cost of said facility, and shall name the CITY
as an additional insured under such insurance; provided, however,
that all insurance proceeds from losses, if any, payable under
insurance, shall be paid to SABRELINER as Trustee thereof.
13. CITY OPERATIONS.
(a) The CITY shall have the right to develop or
improve the landing area on all publicly owned air navigation
facilities of the AIRPORT.
(b) The CITY shall have the right to plant crops on
all land not needed for use at the AIRPORT, but CITY shall plant
such crops in a manner as to conform to FAA Regulations.
(c) The CITY may take any action it considers
necessary to protect the aerial approaches to the AIRPORT against
obstruction, and this shall include the right to prevent
SABRELINER from erecting or permitting to be erected any building
or other structure on the AIRPORT which, in the opinion of the
CITY, would limit the usefulness of the AIRPORT or constitute a
hazard to aircraft.
(d) The CITY hereby warrants that SABRELINER, upon
faithful performance of its covenants and agreements to be kept
and performed herein, shall have peaceable and quiet possession
and enjoyment of the improvements on the demised premises subject
to the right of the CITY to inspect the improvements on the
demised premises at reasonable times and on reasonable prior
notice to SABRELINER.
(e) The CITY shall name in writing to SABRELINER
some person as manager of the AIRPORT who shall be the
representative of the CITY at the AIRPORT.
14. CONDEMNATION. If during the term of this Lease all
leased premises shall be taken by public authorities by
condemnation or otherwise, for public or quasi-public purposes,
this lease shall thereupon terminate; however, if only part of
the said building be so taken so as not to materially affect the
conduct of the Lessee's business, then this Lease shall cease
only as to the part so taken and shall continue as to the part
not taken, and the rent shall be adjusted in the proportion that
the value of the premises so taken bears to the value of the
premises hereby leased. In the event a part of the leased
premises shall be taken for public or quasi-public purposes so
that the remaining portion is wholly unsuitable for conduct of
Lessee's business, Lessee shall have the option of terminating
this lease effective on the date of possession of the premises by
the Government Agency condemning same, by giving written notice
to Lessor of its election to do so, which must be exercised
within a reasonable period of time of the date of said surrender
of premises. It is expressly agreed and understood that all sums
awarded or allowed for such taking of said premises, or any part
thereof, or for damages of such taking shall belong to Lessee.
(a) This Lease and Agreement shall be subordinate
to the provisions of any existing or future agreements between
the CITY and the United States, relative to the AIRPORT, the
execution of which has been or may be required as a condition
precedent to expenditure of Federal Funds for the development of
the AIRPORT.
(b) In the event any part of the improvements on
the demised premises shall revert to the United States of America
or become unavailable for use by SABRELINER as provided in this
Paragraph, SABRELINER shall have the option, either to be
reimbursed for its unamortized costs of constructing buildings,
included in the improvements on the demised premises, or to
receive a reasonable rental for such part of its improvements on
the demised premises during the period of time the same are
unavailable. Reimbursement to SABRELINER of the aforementioned
unamortized costs of constructing the buildings included in the
improvements on the demised premises shall refer to amortization
based on the original costs of the buildings involved, less
depreciation on a straight line basis from the date of occupancy
to the 31st day of October, 1995. The date of acceptance of
Hangar 2 (as determined by reference to the CITY's Airport Layout
Plan) by the CITY and of occupancy by SABRELINER shall be deemed
to be 1 January, 1969. The original cost of Hangar 2 for
purposes of depreciation is $100,000.00, it being understood that
additional costs incurred as a result of any supplemental work
which may be performed on the hangar shall be added to this base
for purposes of computing unamortized costs. In the event any
improvement on the demised premises is constructed by SABRELINER
during the term of this Lease and Agreement, such amortization
shall be based on a period from date of occupancy to date of
expiration of any renewal period of this Agreement which may be
agreed upon by amendment to the Agreement at the time such
improvement on the demised premises is constructed.
15. TAXES. The CITY and SABRELINER shall split
equallyand promptly pay when due all lawful real estate taxes,
assessments and charges of like nature, if any, which during the
rental term of this Lease, or any renewal rental term thereof,
may be levied against any part of the premises or any interest
therein (including any leasehold interests of SABRELINER) which
is the subject of or indirectly affected by this Lease and
Agreement, or may become a lien thereon by virtue of levy,
assessment or charge by the Federal Government, the State of
Missouri, any municipal corporation, county, governmental
successor in authority to the foregoing, or any other tax or
assessment levying body.
The parties, upon receipt of any tax notice, tax bill
or levy of taxes, shall immediately advise the other of the tax
notice, tax bill or levy of taxes.
16. LAWS, RULES AND REGULATIONS. This Lease and
Agreement shall be governed and controlled by all rules and
regulations which shall be promulgated and enacted by the Board
of Aldermen of the CITY for the conduct and operation of the
AIRPORT and aircraft using it, and by the conditions, regulations
and restrictions contained in the license issued to the CITY to
use, maintain, and operate the AIRPORT. Also, this Lease and
Agreement shall be subject to the provisions of the Missouri
Statutes concerning Cities of the Fourth Class, and if any part
hereof shall be in conflict therewith, then that part hereof
shall be voidable by the CITY. However, in the event one or more
parts of this Lease and Agreement shall be voided by the CITY in
conformance with the said Missouri Statutes, this Lease and
Agreement shall still remain in effect.
17. ASSIGNMENT, TRANSFER, PLEDGE. SABRELINER may at any
time assign, transfer, pledge, or otherwise alienate this Lease
and Agreement, or any interest herein, with the prior written
consent of the CITY, which consent shall not unreasonably be
withheld, if the business of any such assignee shall be
substantially the same as a fixed base operator.
18. TERMINATION.
(a) If the CITY shall fail to keep and perform any
of the agreements, representations and warranties on its part to
be kept and performed hereunder, and such default shall continue
for a period of thirty (30) days after written notice thereof is
given by SABRELINER to the CITY, then and in any such event
SABRELINER may declare this Lease and Agreement terminated and
SABRELINER may thereupon cease its business as a fixed base
operator at the AIRPORT; provided nevertheless that SABRELINER
may recover from the CITY damages arising from such termination.
No delay or omission on the part of SABRELINER to exercise any
right arising from the CITY's default under this Lease and
Agreement, or the acquiescence therein by SABRELINER shall act as
a waiver of any breach of this Lease and Agreement.
(b) SABRELINER shall have the right to terminate
this Lease and Agreement if SABRELINER shall be unable to
continue to conduct its business as a fixed base operator at the
AIRPORT, in substantially the same manner and to the same extent
theretofore conducted, because of (1) any law; (2) and rule,
order, condemnation, regulation or other action or non-action of
any Governmental authority, board, agency or officer having
jurisdiction thereof; (3) or fire, wind, flood, or acts of God,
or any other cause not due to the fault of SABRELINER or beyond
its control.
(c) In the event that the AIRPORT shall cease to
operate as an AIRPORT, or that SABRELINER's improvements on the
demised premises shall not be available to it, because of action
by the CITY, SABRELINER shall receive reasonable rental from the
CITY for the part of the improvements on the demised premises
affected; provided, however, that in the event said action by the
CITY shall be such that it will prevent SABRELINER from carrying
on its business as a fixed base operator at the AIRPORT for a
period of more than sixty (60) days then SABRELINER shall have
the right to be reimbursed by the CITY for the unamortized costs
of the construction of buildings included in the improvements on
the demised premises, in the manner set forth in Paragraph 18(a)
and 18(b).
(d) Upon any termination of this Lease and
Agreement, SABRELINER shall have a reasonable time from the date
of such termination within which to remove from the improvements
on the demised premises all machinery, tools, equipment, and
material installed by it.
(e) In the event of destruction of any buildings
erected by SABRELINER which are damaged or destroyed by flood,
the CITY shall not be obligated to compensate SABRELINER for any
such unamortized cost.
19. NOTICE. Any required notice to the CITY provided for
herein shall be sufficient if sent by registered or certified
mail, postage prepaid, to the City Administrator, City of
Perryville, Perryville, Missouri; and any such notice to
SABRELINER shall be sufficient if sent in the same
manner,addressed to Sabreliner Corporation, 6161 Aviation Drive,
St. Louis, Missouri 63134, or such other address as may be
designated by the CITY or SABRELINER in writing from time to
time.
20. FUTURE USE. It is specifically agreed and
understood by both parties hereto that none of the rights herein
granted to SABRELINER shall prevent the CITY from entering into
any other fixed base operator agreements that they may desire in
the future and the CITY, in retaining said rights, specifically
retains all its use of the ramps and other improvements on the
demised premises surrounding said improvements on the demised
premises in order to effectively and efficiently permit the
operation of the AIRPORT by other fixed base operators or other
lessees.
21. COVENANTS BY SABRELINER.
(a) SABRELINER for itself, its heirs, personal
representatives, successors in interest and assigns ss part of
the consideration hereof does hereby covenant and agree as a
covenant running with the land that (l) no person on the grounds
of race, color or national origin shall be excluded from
participation in, denied the benefits of or be otherwise
subjected to discrimination in the use of said facilities; (2)
that the construction of any improvements on, over or under such
land and the furnishing of services thereon, no person on the
grounds of race, color or national origin shall be excluded from
participation in, denied the benefits of or be otherwise
subjected to discrimination; (3) that SABRELINER shall use the
premises in compliance with a11 other requirements imposed by or
pursuant to 49 CFR Part 21, Nondiscrimination in Federally
Assisted Programs of the Department of Transportation, and as
said regulations may be amended.
(b) SABRELINER assures that it will undertake
affirmative action to insure that no person shall on the grounds
of race, color, national origin or sex shall be excluded from
participating in any employment activities. SABRELINER assures
that no person shall be excluded on these grounds from
participating in or receiving the services or benefits of any
program or activity covered by this Subpart. SABRELINER assures
that it will require that its covered suborganizations provide
assurances to SABRELINER that they similarly will undertake
affirmative action that, they will require assurances from their
suborganizations.
22. CAPITAL IMPROVEMENTS. SABRELINER hereby
acknowledges that lease payments made hereunder are utilized by
the CITY to fund capital improvements and provide maintenance at
the Perryville Municipal Airport. In view of said fact,
SABRELINER hereby agrees not to demand any capital improvement to
be constructed by the CITY in excess of the amount of revenue
derived by the CITY from any yearly lease payment during the
lifespan of this Lease and Agreement. CITY, however, shall
cooperate and assist SABRELINER in applying for and obtaining
available federal, state and municipal revenue financing when
necessary for needed capital improvement.
25. ENTIRE AGREEMENT. This Lease and Agreement represents the
entire understanding between the CITY and SABRELINER concerning
the improvements on the demised premises and SABRELINER's
business as a fixed base operator at the AIRPORT. There are no
undertakings, conditions, representations, or warranties with
regard to the said improvements on the demised premises and
business which are not incorporated herein. All amendments,
modifications, renewals, or extensions of this Lease and
Agreement shall be in writing duly signed by the CITY and
SABRELINER. This Lease and Agreement shall supersede all other
Lease Agreements by and between the City of Perryville, Missouri
and Sabreliner Corporation or any of its predecessors.
IN WITNESS WHEREOF, the parties have executed this Lease
and Agreement this 17th day of December, 1986, by their duly
authorized officers.
CITY OF PERRYVILLE, MISSOURI
By: /s/ Robert J. Miget
Major
ATTEST:
/s/ Richard Davis
City Clerk
SABRELINER CORPORATION
BY:/s/ F. Holmes Lamoreux
President
Chairman of the Board &
Chief Executive Officer
FIRST AMENDMENT TO LEASE AND AGREEMENT
THIS FIRST AMENDMENT TO LEASE AND AGREEMENT is made and
entered into this 7th day of February, 1990, by and between the
CITY OF PERRYVILLE, MISSOURI, a municipal corporation located in
the County of Perry, State of Missouri, hereinafter referred to
as "CITY", and SABRELINER CORPORATION, a business corporation of
the State of Delaware, hereinafter referred to as "SABRELINER".
WHEREAS, CITY and SABRELINER entered into a Lease and Agreement
dated December 17, 1986; and
WHEREAS, said parties are desirous of amending and
extending the Lease extension provisions in said Lease; and
WHEREAS, the parties desire to memorialize their agreement
for such an extension in writing.
NOW, THEREFORE, in consideration of the mutual covenants
and conditions hereinafter set forth, the sufficiency of which
are hereby acknowledged by the parties, the parties hereto
covenant and agree as follows:
1. In paragraph 3 of the December 17, 1986 Agreement,
entitled "TERM", line 6, which is on page 3 of said Agreement,
the words "July 1, 1996," are to be deleted, and in place
thereof, the words "November 1, 1995," shall be inserted. The
parties agree that this change is made only for the purpose of
causing the ten year option allowed in said Agreement to commence
at the end of the current lease term.
2. The CITY hereby grants to SABRELINER an extended
option period comprised of five separate 5-year increments, the
last of which would end in the year 2030. SABRELINER's right to
exercise such extended incremental options shall be contingent
upon exercise of the ten (10) year option provided in paragraph 3
of the December 17, 1986 Agreement, as well as any five (5) year
increment preceding the five (5) year increment period sought to
be exercised. SABRELINER shall give to the CITY written notice
of it's intent to exercise the extended option for any five (5)
year increment as provided herein, which notice shall be given
not later than sixty (60) days prior to the commencement of the
new five (5) year increment term.
3. In the event SABRELINER exercises one or more of the
five-year options granted herein, the annual rent during the five
year periods shall be as set forth below:
Years Annual Rent
November 1, 2005 to October 31, 2010 $47,822.00
November 1, 2010 to October 31, 2015 $50,213.00
November 1, 2015 to October 31, 2020 $52,724.00
November 1, 2015 to October 31, 2025 $55,360.00
November 1, 2025 to October 31, 2030 $58,128.00
4. The parties agree that the annual rental payments
for the extended lease increments provided for in this Agreement
shall be due and payable to the City Clerk of the City of
Perryville on July 1 of each year during any five (5) year
increment.
5. That the parties hereto in a11 respects otherwise
reaffirm those provisions of the December 17, 1986 Lease and
Agreement which have not been amended herein.
6. That the parties hereto agree that this First Amendment to
Lease and Agreement shall not be binding upon the parties until
such time as it has been duly executed by both parties.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Lease and Agreement this 7th day of February, 1990,
by their duly authorized officers:
PERRYVILLE, MISSOURI
BY: /s/ Robert S. Miget
Mayor
ATTEST:
/s/ Richard Davis
City Clerk
SABRELINER CORPORATION
BY: /s/ F. Holmes Lamoreux
Chairman of the Board &
Chief Executive Officer
There appeared before me F. Holmes Lamoreux, Chief
Executive Officer who, in accordance with the bylaws of
Sabreliner Corporation is the legal representative of Sabreliner
Corporation and has the authority to bind Sabreliner Corporation
to perform under this Real Estate Lease Agreement and Contract.
ATTEST :
BY: /s/ Gail B. Johnson
Assistant Corporate Secretary
STATE OF MISSOURI )
COUNTY OF PERRY ) SS.
On this 7th day of February, 1990, before me personally
appeared Robert J. Miget, to me known, who being by me first duly
sworn did say that he is the Mayor of the City of Perryville,
Missouri, a municipal corporation of the State of Missouri, and
the seal affixed to the foregoing instrument is the seal of said
City, and said instrument was signed and sealed on behalf of said
City by authority of its Board of Aldermen and said Robert J.
Miget acknowledged said instrument to be the free act and deed of
said City.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal at my office in said county and state
the day and year first above written.
/s/ JoAnn Hayden, Notary Public
State of Missouri
County of Perry
My term expires: 08/20/93
STATE OF MISSOURI )
COUNTY OF St. Louis ) SS.
On this 6th day of February, 1990, before me personally
appeared F. Holmes Lamoreux to me known, who, being by me first
duly sworn did say that he is the Chief Executive Officer of
Sabreliner Corporation, a corporation of the State of Missouri,
and the seal affixed to the foregoing instrument is the corporate
seal of said corporation, and said instrument was signed and
sealed on behalf of said corporation by authority of its Board of
Directors, and said F. Holmes Lamoreux acknowledged said
instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal at my office in said county and state
the day and year first above written.
/s/ Sandra G. Foster, Notary Public
State of Missouri
County of St. Louis
My term expires: April 4, 1991
SECOND AMENDMENT TO LEASE AND AGREEMENT
THIS SECOND AMENDMENT TO LEASE AND AGREEMENT
("Amendment") made this 25th day of June, 1990, by and between
the CITY OF PERRYVILLE, a municipal corporation located in the
County of Perry, State of Missouri ("City"), and Sabreliner
Corporation, a Delaware corporation ("Sabreliner").
W I T N E S S E T H:
WHEREAS, City and Sabreliner entered into that
certain Lease and Agreement dated December 17, 1986, as amended
by that certain First Amendment to Lease and Agreement dated
February 7, 1990 (the "Lease"), covering certain premises located
at the Perryville Municipal Airport near the Village of McBride,
County of Perry, State of Missouri, and more particularly
described on Exhibit A attached hereto and incorporated herein by
reference (the "Premises");
WHEREAS, Sabreliner desires to exclude a certain
portion of the Premises from the description contained in
Paragraph 1 of the Lease (the "Excluded Premises") thereby
leaving a portion of the premises remaining therein (the
"Remaining Premises");
WHEREAS, it is contemplated that the City will enter
into a Lease covering the Excluded Premises with Pegasus I, L.P.,
a Missouri limited partnership, in order to facilitate the
construction of an aircraft hangar on the Excluded Premises and
that said Excluded Premises together with the newly constructed
aircraft hangar will be subleased to Sabreliner;
WHEREAS, in connection with deleting the Excluded
Premises from the legal description contained in the Lease and
entering into a new Lease with Pegasus I, L.P., City and
Sabreliner acknowledge that it is necessary to amend the legal
description contained in Paragraph 1 of the Lease to reduce the
area contained therein.
WHEREAS, in addition to amending the legal description
contained in the Lease, City and Sabreliner also acknowledge that
it is equitable to reduce Sabreliner's rental obligations under
Paragraph 4 of the Lease on a pro rata basis relative to the area
of the Excluded Premises; however Sabreliner and City have agreed
that Sabreliner's rent obligations under Paragraph 4 of the Lease
shall not be so reduced until the expiration or earlier
termination of the Sublease by and between Pegasus I, L.P., as
Lessor, and Sabreliner, as Lessee.
WHEREAS, the parties hereto desire to amend the Lease
and Agreement to (i) delete the Excluded Premises from the legal
description of the premises contained in the Lease; (ii) provide
for a pro rata reduction in Sabreliner's rental obligations due
under Paragraph 4 of the Lease in the event of the expiration or
earlier termination of the Sublease; and (iii) provide for
certain other provisions which are mutually agreeable to the
parties.
NOW, THEREFORE, in consideration of Ten Dollars
($10.00) and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. The legal description contained in Paragraph 1 of
the Lease shall be deleted in its entirety and in its place and
stead shall be inserted the following:
Part of U.S. Survey 1866, Township 37 North, Range
11 East and part of U.S. Survey 3162, Township 36 North
Range 11 East of the Fifth Principal Meridian, Perry
County, Missouri, and being more particularly described
as follows:
Beginning at a point on the line between said township from which
the Northeast corner of said Survey 3162 bears East 560.00 feet;
thence leaving said Township line South 42 00' 00" East 710
feet; thence South 48 00' 00" West 740.00 feet; thence South 3
00' 00" West 100.00 feet to the North right-of-way of State
Highway "H"; thence along said right-ofway North 87 00' 00" West
130.00 feet; thence leaving said right-of-way North 3 00' 00"
East 140.00 feet; thence North 42 00' 00" West 480.00 feet;
thence South 48 00' 00" West 320.00 feet; thence North 42 00' 00"
West 659.79 feet; thence North 48 00' 00" East 788.64 feet;
thence North 42 00' 00" West 80.00 feet; thence North 48 00' 00"
East 130.00 feet; thence South 42 00' 00" East 80.00 feet; thence
North 48 00' 00" East 475.00 feet; thence South 42 00' 00" East
480.OO feet; thence South 48 00' 00" West 270.00 feet; thence
South 42 00' 00" East 70.OO feet to the point of beginning and
containing 31.58 acres.
LESS :
PART OF THE UNITED STATES SURVEY 1866, T0WNSHIP 37 NORTH,
RANGE 11 EAST OF THE FIFTH PRINCIPAL MERIDIAN, PERRY COUNTY,
MISSOURI AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT FROM WHICH THE NORTHEAST CORNER OF
UNITED STATES SURVEY 3162, IN TOWNSHIP 36 NORTH, RANGE
11 EAST OF THE FIFTH PRINCIPAL MERIDIAN, AND A CORNER
OF SAID UNITED STATES SURVEY 1866 BEARS SOUTH 79
DEGREES 37 MINUTES 36 SECONDS EAST 870.92 FEET AND THE
MOST NORTHERN CORNER OF HANGER 1 BEARS SOUTH 18 DEGREES
00 MINUTES 25 SECONDS EAST 9.73 FEET; THENCE NORTH 40
DEGREES 26 MINUTES 31 SECONDS WEST 192.00 FEET; THENCE
SOUTH 49 DEGREES 33 MINUTES 29 SECONDS WEST 208.00
FEET; THENCE SOUTH 40 DEGREES 26 MINUTES 31 SECONDS
EAST 192.00 FEET FROM WHICH THE MOST WESTERN CORNER OF
HANGER 1 BEARS SOUTH 62 DEGREES 52 MINUTES 57 SECONDS
EAST 9.73 FEET; THENCE NORTH 49 DEGREES 33 MINUTES 29
SECONDS EAST 208.00 FEET TO THE POINT OF BEGINNING AND
CONTAINING 0.92 ACRE.
2. Paragraph 3 of the lease with respect to the term
shall be deleted in its entirety and in its place and stead shall
be inserted the following:
3. TERM. The term of this Lease and Agreement
shall be for a period of ten (10) years commencing the 1st day of
November, 1986 and terminating the 31st day of October, 1995.
The City grants Sabreliner the right to renew this
lease in accordance with the terms hereof and at the 1995 rental
figure for an additional ten (10) years commencing on November
1, 1995, at Sabreliner's option by giving sixty (60) days prior
written notice to the City of its intent to do so before the
expiration of this Agreement.
In addition to the foregoing ten (10) year option,
the City hereby grants to Sabreliner an extended option period
comprised of five separate 5-year increments, the last of which
would end in the year 2030. Sabreliner's right to exercise such
extended incremental options shall be contingent upon exercise of
the ten (10) year option provided for in the second paragraph of
Paragraph 3 hereof, as well as any five (5) year increment
preceding the five (5) year increment period sought to be
exercised. Sabreliner shall give to City written notice of its
intent to exercise the extended option for any five (5) year
increment as provided herein, which notice shall be given not
later than sixty (60) days prior to the commencement of the new
five (5) year increment term.
3. The following shall be inserted immediately
following the columns setting forth the date and amount payable
for yearly installments of rent in Paragraph 4 of the Lease:
In the event that Sabreliner exercises its right
to renew the Lease for an additional ten (10) year period as set
forth in the first paragraph of Paragraph 3 of the Lease,
Sabreliner shall pay on July 1st of each year of said ten (l0)
year period the amount of Forty-Five thousand Five Hundred
Forty-Five Dollars ($45,545.00).
In the event that Sabreliner exercises the right to
renew the Lease for any of the five (5) year option periods as
set forth in the second paragraph of Paragraph 3 of this Lease,
Sabreliner shall pay on July 1st of each year the amounts set
forth as follows:
Years Annual Rent
November 1, 2005 to October 31, 2010 $47,822.00
November 1, 2010 to October 31, 2015 $50,2l3.00
November 1, 2015 to October 31, 2020 $52,724.00
November 1, 2020 to October 31, 2025 $55,360.00
November 1, 2025 to October 31, 2030 $58,128.00
Notwithstanding anything in Paragraph 4 of the
Lease to the contrary, in the event of the expiration or earlier
termination of that certain Sublease dated June 25, 1990, by and
between Pegasus I, L.P., a Missouri limited partnership, as
Lessor, and Sabreliner, as Lessee (the "Sublease"), the annual
rent due from Sabreliner hereunder shall be reduced by three
percent (3%) for all years remaining in the term of the Lease,
including any years remaining in the ten (10) year option term or
any five (5) year option terms whether or not the same have been
exercised by Sabreliner. Sabreliner shall notify City of any
such expiration or earlier termination of the Sublease within ten
(10) days of the occurrence thereof.
In the event that such expiration or earlier
termination of the Sublease occurs on a date other than July 1st,
the three percent (3%) reduction in rental pursuant to Paragraph
4 of the Lease shall be prorated based on the number of days
remaining in the lease year in which such expiration or earlier
termination of the Sublease occurs.
4. The second (2nd) sentence of Paragraph 8 of the
Lease shall be deleted in its entirety and in its place and stead
shall be inserted the following:
Title to a11 improvements shall remain in
SABRELINER and SABRELINER shall be entitled to
finance and claim depreciation or amortization
therefor until the expiration or earlier
termination of the Lease in which case title to
said improvement (excepting movable furnishings,
fixtures, trade fixtures, equipment and other
personal property of SABRELINER) shall vest in
the CITY.
5. Paragraph 10 of the Lease shall be deleted in its
entirety and in its place and stead shall be inserted the
following:
10, FLOOD. In the case of flood, TENANT shall
participate in cleaning up damage caused by such flood
on a pro rata basis relative to the square feet of the
premises to the total square feet of all leased
premises at the AIRPORT, and in this task shall be
assisted by the CITY on an equal basis; provided,
however, that such participation by TENANT shall
include putting a11 buildings affected by flood back
into serviceable condition, so long as only reasonable
amounts of labor are involved in doing the same, but
shall
not include replacing any buildings destroyed by flood
nor repairing major damage, nor furnishing labor in
connection with major repairs or replacement of any
buildings affected by flood.
6. Subparagraphs (b)-(e) of Paragraph 18 of the
Lease shall be relettered as subparagraphs (c)-(f) of the Lease,
respectively.
7. The following shall be inserted as the new
subparagraph (b) of Paragraph 18 of the Lease.
(b) If SABRELINER shall fail to keep
and perform any of the agreements, representations
and warranties on its part to be kept and performed
hereunder, and such default shall continue for a
period of thirty (30) days after written notice
thereof is given by the CITY to SABRELINER provided,
however, if the nature of the default is such that
the same is incapable of being cured by SABRELINER
with such thirty (30) day period, SABRELINER shall
be granted a reasonable time beyond said thirty (30)
day period to cure such default provided that
SABRELINER has commenced the cure of such default
within the aforementioned thirty (30) day period and
continue to diligently prosecute the cure of said
default to completion, then and in any such event
the CITY may declare this Lease and Agreement
terminated; and the CITY may recover from SABRELINER
damages arising from such termination. No delay or
omission on the part of the CITY to exercise any
right arising from SABRELINER's default under this
Lease and Agreement, or the acquiescence therein by
the CITY shall act as a waiver of any breach of this
Lease and Agreement.
8. This Amendment shall be binding upon and shall
inure to the parties hereto and their respective successors and
assigns.
9. Except as amended hereby a11 other covenants,
agreements, terms and conditions of the Lease shall remain in
full force and effect. The amendments set forth in Paragraphs 4
and 6 hereof shall be deemed to have been made as of the original
date of the Lease to reflect the original intention of the
parties hereto as of the original date of the Lease.
IN WITNESS WHEREOF, the parties hereto have executed
this Second Amendment to Lease and Agreement as of the date and
year first above written.
CITY OF PERRYVILLE, MISSOURI
By: /s/ Robert V. Pirrie, Mayor Pro-Tem
SABRELINER CORPORATION, a Delaware corporation
By: /s/ Jerry L. Leath
Title: Vice President, Administration
STATE OF MISSOURI )
) SS.
COUNTY OF PERRY )
On this 25th day of June, 1990, before me personally appeared
Robert V. Pirrie, to me known, who being by me first duly sworn
did say that he is the Mayor, Pro Tem of the City of Perryville,
Missouri, a municipal corporation of the State of Missouri, and
the seal affixed to the foregoing instrument is the seal of said
City, and said instrument was signed and sealed on behalf of
said City by authority of its Board of Aldermen and said he
acknowledged said instrument to be the free act and deed of said
City.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal at my office in said county and state
the day and year first above written.
/s/ JoAnn Hayden, Notary Public
My commission expires: 08/20/93
STATE OF MISSOURI )
) SS,
COUNTY OF ST. LOUIS )
On this 25th day of June, 1990, before me personally
appeared Jerry L. Leath, to me known, who being by me first duly
sworn did say that he is Vice President of Sabreliner
Corporation, a Delaware corporation, and the seal affixed to the
foregoing instrument is the corporate seal of said corporation,
and said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors, and said he
acknowledged said instrument to be the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal at my office in said county and state
the day and year first above written.
/s/ Sandra G. Foster, Notary Public
My commission expires: 4/4/91
EXHIBIT A
Part of U.S.Survey 1866, Township 37 North, Range 11 East
and part of U.S. Survey 3162, Township 36 North Range 11
East of the Fifth Principal Meridian, Perry County,
Missouri, and being more particularly described as follows:
Beginning at a point on the line between said township from
which the Northeast corner of said Survey 3162 bears East
560,00 feet; thence leaving said Township line South 42 00'
00" East 710 feet; thence South 48 00' 00" West 740.00 feet;
thence South 3 00' 00" West 100.00 feet to the North right-
of-way of State Highway "H"; thence along said right-of-way
North 87 00' 00" West 130.00 feet; thence leaving said right-
of-way North 3 00' 00" East 140.00 feet; thence North 42 00'
00" West 480.00 feet; thence South 48 00' 00" West320.00
feet; thence North 42 00' 00" West 659.79 feet; thence North
48 00' 00" East 788.64 feet; thence North 42 00' 00" West
80.00 feet; thence North 48 00' 00" East 130.00 feet; thence
South 42 00' 00" East 80.00 feet; thence North 48 00' 00"
East 475.00 feet; thence South 42 00' 00" East 480.00 feet;
thence South 48 00' 00" West 270.00 feet; thence South 42
0O' 00" East 70.00 feet to the point of beginning and
containing 31.58 acres.
THIRD AMENDMENT TO LEASE AND AGREEMENT
THIS THIRD AMENDMENT TO LEASE AND AGREEMENT ("Third
Amendment") made this 17th day of March, 1995, by and between the
CITY OF PERRYVILLE, a municipal corporation located in the County
of Perry, State of Missouri ("City"), and Sabreliner Corporation,
a Delaware corporation ("Sabreliner").
W I T N E S S E T H:
WHEREAS, City and Sabreliner entered into that certain
Lease and Agreement dated December 17, 1986 ("Lease &
Agreement"), as amended by that certain First Amendment to Lease
and Agreement dated February 7, 1990 ("First Amendment"), and
amended by that certain Second Amendment to Lease and Agreement
dated June 25, 1990 ("Second Amendment"), (the Lease and
Agreement, First Amendment and Second Amendment are hereinafter
collectively referred to as the "Lease"); and
WHEREAS, Sabreliner entered into a Sublease with Pegasis
I, L.P. of a certain portion of the originally demised premises
and City entered into a Lease concerning the same premises which
said Sublease and Lease are unaffected by this Third Amendment;
and
WHEREAS, the Great Flood of 1993 flooded the demised premises
causing substantial damage and destruction; and
WHEREAS, the parties hereto desire to amend the Lease and
Agreement to:
1. Provide funding for repairs to hangers 1, 2, 3B, 4
and 8 by prepayment of rent by Sabreliner under the Lease;
2. Abate the rent due from Sabreliner pursuant to the
Lease for a term sufficient to cover the rent prepayment by
Sabreliner;
3. Provide for a transfer of operation and control of
the City's sewer plant at the airport to Sabreliner;
4. Revise the insurance requirements;
5. Transfer responsibility for the payment of a11
assessed against the demises premises; and
6. Provide for certain other provisions which are
mutually agreeable to the parties.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
agree to amend the Lease as follows:
1. RENT ABATEMENT:
Sabreliner has heretofore paid the sum of $73,561.38
to contractors for specific work done for repairs to the demised
premises, pursuant to Agreement with the City dated April 6, 1994
which provides that such payment would be deemed to be prepayment
of rent due under the Lease. Therefore, rent owed to City
pursuant to the Lease is paid in full up to March 1, 1996.
Sabreliner has heretofore further paid the sum of
$510,093.00 to City for repair and rehabilitation of hangers 1,
2, 3B, 4 and 8 following the Great Flood of 1993.
Contemporaneously herewith Sabreliner has extended the term of
the Lease through October 21, 2025, so that the sum paid plus
interest thereon is by this amendment recognized as prepaid rent
for that portion of the extended term as set forth below.
Rent Date 8% Interest Balance
10/4/94 $510,093.00
10/4/95 $40,807.44 550,900.44
$30,363.34 7/1/96 520,537.10
10/4/96 41,642.97 562,180.07
45,545.00 7/1/97 41,330.81 557,965.87
45,545.00 7/1/98 40,993.67 553,414.53
45,545.00 7/1/99 40,629.56 548,499.09
45,545.00 7/1/00 40,236.33 543,190.41
45,545.00 7/1/01 39,811.63 537,457.04
45,545.00 7/1/02 39,352.96 531,265.00
45,545.00 7/1/03 38,857.60 524,457.60
45,545.00 7/1/04 38,322.61 517,355.20
45,545.00 7/1/05 37,744.87 509,555.01
47,822.00 7/1/06 36,938.64 498,671.65
47,822.00 7/1/07 36,067.97 486,917.62
47,822.00 7/1/08 35,127.65 474,223.60
47,822.00 7/1/09 34,112.10 460,513.36
47,822.00 7/1/10 33,015.31 445,706.66
50,213.00 7/1/11 31,639.92 427,133.15
50,213.00 7/1/12 30,153.61 407,073.76
50,213.00 7/1/13 28,548.86 385,409.62
50,213.00 7/1/14 26,815.73 362,012.34
50,213.00 7/1/15 24,943.95 336,743.28
52,724.00 7/1/16 22,721.54 306,740.82
52,724.00 7/1/17 20,321.35 274,338.16
52,724.00 7/1/18 17,729.13 239,343.29
52,724.00 7/1/19 14,929.54 201,548.83
52,724.00 7/1/20 11,905.99 160,730.81
55,360.00 7/1/21 8,429.67 113,800.47
55,360.00 7/1/22 4,675.24 63,115.71
55,360.00 7/1/23 620.46 8,376.16
55,360.00 7/1/24 0 0
55,360.00 7/1/25 0 0
Rent in the amount of $46,983.84 shall be due and owing on July
1, 2024. Full rent payments of $55,360.00 shall be due and owing
on July 1, 2025. In the event Sabreliner terminates the Lease
prior to July 1, 2024 the City shall not be obligated in any
manner whatsoever to refund to Sabreliner any sum of money or
other consideration for unused rent abatement.
2. FLOOD:
The parties hereto agree that section 10 of the Lease shall be
amended to read as follows:
10. FLOOD:
a) Runway:
In the case of flood, Sabreliner shall
participate on an equal basis with other fixed base operators at
the Airport to a reasonable extent in cleaning up the runway,
parking area, aprons, and other areas or improvements ancillary
to the operation of the runway, and in this task shall be
assisted by the City on an equal basis.
b) Improvements:
In the event of Flood, which damages the
improvements leased hereunder, the provisions of Section 11
entitled "Damage and Destruction" along and together with the
provisions of Section 12 entitled "Insurance" shall control.
Sabreliner shall carry flood insurance on all
improvements leased hereunder in the amount of $200,000.00 per
building at Sabreliner's cost. The City shall be named on said
Flood Insurance Policy as an additional insured. All proceeds
of any flood insurance shall be, upon receipt, immediately paid
into escrow with a nationally reputable title insurance company
or a bank of Sabreliner's choice in the Perryville area and shall
be used solely for the reconstruction or repair of the
improvements required by Sabreliner and leased hereunder absent
written agreement of the parties to the contrary."
3. DAMAGE AND DESTRUCTION. Section 11 of the Lease is
hereby amended to read as follows:
"11. DAMAGE AND DESTRUCTION. If improvements on the
demised premises shall be destroyed or damaged, in whole or in
part, by fire, wind, flood or acts of God, or the use thereof by
Sabreliner is suspended, restricted or otherwise interfered with
by said events, and said improvements can be reasonably restored
to the condition thereof immediately preceding such damage or
destruction within a period of sixty (60) days, all the terms and
covenants of this Lease and Agreement shall remain in full force
and effect during said reconstruction.
(a) In the event of damage or destruction of the
improvements on the demised premises to such an extent that they
cannot be reasonably restored to the condition thereof
immediately preceding such damage or destruction within a period
of sixty (60) days; or in the event SABRELINER will be prevented
by such damage or destruction from carrying on its business as a
fixed base operator at the AIRPORT for a period of more than
sixty (60) days; or in the event the cost of restoration of the
improvements on the demised premises would exceed the total
amount of insurance proceeds available to SABRELINER arising from
such damage or destruction, then SABRELINER sha11 have the right
to terminate this Lease and Agreement as provided herein.
(b) SABRELINER, after damage or destruction of
improvements at the AIRPORT, may elect to restore the facilities
and apply the proceeds of SABRELINER'S insurance coverage to the
repair or reconstruction costs of such restoration. In the event
the estimated cost of such restoration of the improvements at
the AIRPORT total an amount in excess of the insurance proceeds
payable to SABRELINER arising from such damage or destruction,
and neither CITY nor SABRELINER desires to pay such excess
amount, then SABRELINER sha11 have the right to terminate the
Lease by written notice to the CITY, and after reimbursement to
SABRELINER from the insurance proceeds of the unused prepaid rent
paid by SABRELINER to the CITY hereunder, if any, the balance of
the insurance proceeds shall be split eighty percent (80%) to
SABRELINER and twenty percent (20%) to the CITY.
4. INSURANCE: Section 12 of the Lease shall be deleted
in its entirety and in its place and stead shall be inserted the
following:
"12. INSURANCE. SABRELINER shall keep or cause to
be kept in full force and effect at all times general liability
insurance, property insurance and workers' compensation and
employees' liability insurance. The general public liability
insurance shall have policy limits in minimum amounts of
$l,000,000 per occurrence, $l,000,000 personal and advertising
liability, $1,000,000 Products--Completed operations aggregates,
$1,000,000 general aggregate and $5,000 medical expense (any one
person).
The property insurance carried shall be written on a
blanket basis in the amount of $2,500,OOO. The form of coverage
written shall be on an all risk basis including earthquake
coverage. SABRELINER shall carry or cause to be kept property
insurance on an a11 risk basis including earthquake coverage on
all improvements constructed or to be constructed in the future
in an amount equal to the replacement cost of said facility. The
CITY shall be named as an additional insured under such
insurance; provided, however, that all insurance proceeds from
losses, if any, payable under insurance, shall be paid to
SABRELINER as Trustee thereof.
The workers' compensation and employers' liability
insurance shall have at least the statutory limits as required by
state law.
The above stated coverages shall be afforded by
policies issued by a reliable insurance company or companies,
approved by the CITY which approval shall not be unreasonably
withheld. SABRELINER shall hold the CITY harmless and shall
indemnify CITY for any and all claims for damages, for death or
injuries to persons, for property damage arising out of
SABRELINER's use and maintenance of the improvements on the
demised premises."
5. TAXES: Section 15 of the Lease with respect to
taxesshall be deleted in its entirety and in its place and stead
shall be inserted the following:
"15. TAXES. SABRELINER shall promptly pay when due
all lawful real estate taxes, assessments and charges of like
nature, if any, which during the term of this Lease, or any
renewal term thereof, may be levied against any part of the
demised premises or any interest therein (including any leasehold
interests of SABRELINER) which is the subject of or indirectly
affected by this Lease and Agreement, or may become a lien
thereon by virtue of levy, assessment or charge by the Federal
Government, the State of Missouri, any municipal corporation,
county, governmental successor in authority to the foregoing, or
any other tax or assessment levying body.
The CITY, upon receipt of any tax notice, tax bill or
levy of taxes, shall immediately forward to SABRELINER the tax
notice, tax bill or levy of taxes. Should SABRELINER not pay any
taxes, assessments or other charges of like nature when due, the
CITY may pay said taxes, assessments or charges and assess said
sums as additional rent to SABRELINER."
6. TERMINATION: Section 18 of the Lease shall be deleted
in its entirety and in its place and stead shall be inserted the
following:
"l8. TERMINATION.
(a) If the CITY sha11 fail to keep and perform
any of the agreements, representations and warranties on its part
to be kept and performed hereunder, and such default sha11
continue for a period of thirty (30) days after written notice
thereof is given by SABRELINER to the CITY, then and in any such
event SABRELINER may declare this Lease and Agreement terminated
and SABRELINER may thereupon cease its business as a fixed base
operator at the AIRPORT; provided nevertheless that SABRELINER
may recover from the CITY damages arising from such termination.
No delay or omission on the part of SABRELINER to exercise any
right arising from the CITY'S default under this Lease and
Agreement, or the acquiescence therein by SABRELINER shall act as
a waiver of any breach of this Lease and Agreement.
(b) SABRELINER sha11 have the right to terminate
this Lease and Agreement if SABRELINER sha11 be unable to
continue to conduct its business as a fixed base operator at the
AIRPORT, in substantially the same manner and to the same extent
theretofore conducted, because of (1) any law; (2) and rule,
order, condemnation, regulation or other action or non-action of
any Governmental authority, board, agency or officer having
jurisdiction thereof; (3) or fire, wind, flood, or acts of God,
or any other cause not due to the fault of SABRELINER or beyond
its control.
(c) In the event that the AIRPORT shall cease to
operate as an AIRPORT, or that SABRELINER'S improvements on the
demised remises shall not be available to it, because of action
by the CITY, SABRELINER shall receive reasonable rental from the
CITY for the part of the improvements on the demised premises
affected; provided, however, that in the event said action by the
CITY shall be such that it will prevent SABRELINER from carrying
on its business as a fixed base operator at the AIRPORT for a
period of more than sixty (60) days then SABRELINER shall have
the right to be reimbursed by the CITY for the unamortized costs
of the construction of Hangar 9.
(d) Upon any termination of this Lease and
Agreement, SABRELINER shall have a reasonable time from the date
of such termination within which to remove from the improvements
on the demised premises all machinery, tools, equipment, and
material installed by it.
(e) In the event of destruction of any buildings
erected by SABRELINER which are damaged or destroyed by flood,
the CITY shall not be obligated to compensate SABRELINER for any
such unamortized costs, except as provided in Subsection (c)
above.
(f) If SABRELINER shall fail to keep and perform
any of the agreements, representations and warranties on its part
to be kept and performed hereunder, and such default shall
continue for a period of thirty (30) days after written notice
thereof is given by the CITY to SABRELINER, then and in any such
event the CITY may declare this Lease and Agreement terminated;
provided nonetheless that the CITY may recover from SABRELINER
damages arising from such termination. No delay or omission on
the part of the CITY to exercise any right arising from
SABRELINER'S default under this Lease and Agreement, or the
acquiescence therein by the CITY shall act as a waiver of any
breach of this Lease and Agreement."
7. SEWER PLANT: The following shall be inserted as new
section 26 of the Lease.
"26. SEWER PLANT. For the remainder of the term of
this Lease and Agreement, SABRELINER shall obtain an operating
permit from the State and operate and manage the presently
existing sewer plant currently being used by SABRELINER and owned
by the CITY located at the AIRPORT. SABRELINER shall provide
sewerage services for all buildings and facilities leased by
SABRELINER and located at the AIRPORT. Said services shall be in
compliance with a11 local, state and federal laws and
regulations. Commencing on the date hereof and until such time
as Sabreliner obtains an NPDES permit as aforesaid, if possible,
Sabreliner shall manage said sewer plant under the City's permit
at Sabreliner's cost. Properly certified City personnel shall
assist Sabreliner on a consulting basis until Sabreliner's
personnel can be appropriately certified. The parties acknowledge
that it may be impossible for Sabreliner to obtain an NPDES
permit, nonetheless, the parties further acknowledge the
desirability of Sabreliner managing and maintaining said plant in
accordance with state and federal guidelines.
As a result of Sabreliner's inability to control the
plant operation prior to the date hereof, the City does hereby
agree to indemnify, defend and hold harmless Sabreliner and its
authorized officers and agents from any and all claims, damages,
demands, suits, at law or in equity, arising out of the operation
of the aforesaid plant prior to the date hereof. The City further
agrees to indemnify, defend and hold Sabreliner harmless from any
and all claims, demands or other actions by the State of
Missouri, or the U.S. EPA or other persons alleging either that
Sabreliner is operating or managing the sewer plant without a
permit, or that Sabreliner is operating or managing the sewer
plant improperly or in violation of any law or regulation.
In the event a third party desires to construct
facilities at the AIRPORT and to tie into the presently existing
sewer plant, then, in that event, SABRELINER shall have the
option, in its sole discretion, to allow such third-party to tie
into the sewer plant being operated by SABRELINER, but only on
terms and conditions satisfactory to SABRELINER in order to
protect itself from liability, and to recover its costs.
SABRELINER agrees to negotiate in good faith with any future
third party users of the sewer plant. In the event SABRELINER
determines, in its sole discretion, to decline to allow a third
party to tie into the existing sewer plant, then, in that event,
the CITY shall have the option to take over operation of the
sewer plant, and in such event, the CITY shall give written
notice thereof to SABRELINER. Upon receipt of said notice,
SABRELINER shall have no further obligation to operate and manage
the sewer plant, and the CITY shall be solely responsible for
same, and shall be responsible for obtaining an operating permit
therefor. The CITY shall operate and manage the sewer plant in
compliance with all local,state and federal laws and regulations.
If the CITY takes over operation and management of the sewer
plant, SABRELINER shall have the right to utilize same on the
same terms and conditions as prior to the time the CITY took over
management and operation of same."
8. This Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and assigns.
9. Except as amended hereby, all other covenants, agreements,
terms and conditions of the Lease shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed
this Third Amendment to Lease and Agreement as of the date and
year first above written.
CITY OF PERRYVILLE, MISSOURI
By: /s/ Robert J. Miget, Mayor
ATTEST:
By: /s/ Marilyn Dobbelare, City Clerk SABRELINER CORPORATION, a
Delaware Corporation By: /s/ Rodney E. Olson
Title: Sr.V .P., Finance/Corporate Devevelopment & CFO
STATE OF MISSOURI )
COUNTY OF PERRY ) SS.
On this 17th day of March, 1995, before me personally
appeared Robert J. Miget, to me known, who being by me first duly
sworn did say that he is the Mayor of the City of Perryville,
Missouri, a municipal corporation of the State of Missouri, and
the seal affixed to the foregoing instrument is the seal of said
City, and said instrument was signed and sealed on behalf of said
City by authority of its Board of Aldermen and said Robert J.
Miget acknowledged said instrument to be the free act and deed of
said City.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in said county and state the day and
year first above written.
/s/ JoAnn Hayden, Notary Public
State of Missouri
County of Perry
My term expires: 08-20-97
STATE OF MISSOURI )
COUNTY OF ST. LOUIS ) SS.
On this 16th day of March, 1995, before me personally
appeared Rodney E, Olson, to me known, who being by me first duly
sworn did say that he is the Sr. Vice President, Finance and
Corporate Dev. & CFO of Sabreliner Corporation, a Delaware
Corporation, and the seal affixed to the foregoing instrument is
the corporate seal of said corporation, and said instrument was
signed and sealed on behalf of said corporation by authority of
its Board of Directors, and said Rodney E. Olson acknowledged
said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal at my office in said county and state
the day and year first above written.
By: /s/ Gail B. Johnson, Notary Public State of Missouri
County of St. Louis
My term expires: 5/2/97
LEASE AND AGREEMENT EXTENSION
THIS LEASE AND AGREEMENT EXTENSION is made and entered into this
17th day of March, 1995, by and between the City of Perryville,
Missouri, a municipal corporation, located in the County of
Perry, State of Missouri, hereinafter referred to as "City", and
Sabreliner Corporation, a business corporation of the State of
Delaware, hereinafter referred to as "Sabreliner".
WHEREAS, City and Sabreliner entered into that certain
Lease and Agreement dated December 17, 1986, and amended by that
certain First Amendment to Lease and Agreement dated February 7,
1990, amended by that certain Second Amendment to Lease and
Agreement dated June 25, 1990, and amended by that certain Third
Amendment to Lease and Agreement dated March 17, 1995,
(collectively the "Lease"); and
WHEREAS, section 3 of the Lease grants Sabreliner the
right to renew the term of the Lease at the July, 1995 rental
figure for an additional ten (10) years commencing on November
1, 1995, at Sabreliner's option; and
WHEREAS, section 2 of the First Amendment to Lease and
Agreement grants to Sabreliner an extended option period of five
(5) separate five-year increments with specific rental amounts
set forth; and
WHEREAS, due to the circumstances created by the Flood of
1993 substantially damaging the demised premises, the parties
desire to extend the term of the Lease for an additional thirty
(30) years; and
WHEREAS, Sabreliner has executed its option to extend the
term of the Lease in accordance with the provisions of said
Lease.
NOW, THEREFORE, in consideration of ten dollars ($10.00)
and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby extend the term of the Lease for an additional thirty (30)
years commencing the 1st day of November, 1995, and terminating
on the 31st day of October, 2025. A11 other terms, conditions,
covenants and agreements of the Lease shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Lease and Agreement Extension as of the date and year first above
written.
CITY OF PERRYVILLE, MISSOURI
By: /s/ Robert J. Miget, Major
ATTEST :
/s/ Marilyn Dobbelare, City Clerk
SABRELINER CORPORATION, a Delaware
Corporation
BY: /s/ Rodney E. Olson
Title: SR V.P. Finance/Corp. Dev. & CFO
STATE OF MISSOURI )
COUNTY OF PERRY ) SS.
On this 17th day of March, 1995, before me personally
appeared Robert J. Miget, to me known, who being by me first duly
sworn did say that he is the Mayor of the City of Perryville,
Missouri, a municipal corporation of the State of Missouri, and
the seal affixed to the foregoing instrument is the seal of said
City, and said instrument was signed and sealed on behalf of
said City by authority of its Board of Aldermen and said Robert
J. Miget acknowledged said instrument to be the free act and deed
of said City.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in said county and state the day and
year first above written.
/s/ JoAnn Hayden, Notary Public
State of Missouri
County of: Perry
My term expires: 08-20-97
STATE OF MISSOURI )
COUNTY OF ST LOUIS ) SS.
On this 16th day of March, 1995, before me personally
appeared Rodney E. Olson, to me known, who being by me first duly
sworn did say that he is the Sr. V.P. Finance/Corp. Development
and CFO of Sabreliner Corporation, a Delaware Corporation, and
the seal affixed to the foregoing instrument is the corporate
seal of said corporation, and said instrument was signed and
sealed on behalf of said corporation by authority of its Board of
Directors, and said Rodney E. Olson acknowledged said instrument
to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in said city and state the day and
year first above written.
/s/ Gail B. Johnson, Notary Public
State of Missouri
County of: Perry
My term expires: 5-02-97
EXHIBIT 21
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
SUBSIDIARIES OF THE REGISTRANT
Midcoast Aviation, Inc., incorporated under the laws of Missouri.
SabreTech, Inc., a Delaware corporation.
Turbotech Reparis, Inc., a California corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,254
<SECURITIES> 0
<RECEIVABLES> 30,314
<ALLOWANCES> 962
<INVENTORY> 24,669
<CURRENT-ASSETS> 85,326
<PP&E> 144,546
<DEPRECIATION> 96,235
<TOTAL-ASSETS> 144,618
<CURRENT-LIABILITIES> 36,660
<BONDS> 93,999
0
0
<COMMON> 10
<OTHER-SE> 10,126
<TOTAL-LIABILITY-AND-EQUITY> 144,618
<SALES> 205,633
<TOTAL-REVENUES> 205,633
<CGS> 171,045
<TOTAL-COSTS> 194,001
<OTHER-EXPENSES> (877)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,789
<INCOME-PRETAX> 720
<INCOME-TAX> 350
<INCOME-CONTINUING> 370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 370
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
