WFS Global Holding SAS

Transcription

1 WFS Global Holding SAS Analysis and Commentary Unaudited Pro Forma Consolidated Financial Information Supplemental Pro Forma Data For the Period Ended 325 million Senior secured notes 9.5% due million Senior notes 12.5% due 2022

2 This Analysis and Commentary ( Analysis and Commentary ) is intended to supplement the Unaudited Pro Forma Consolidated Financial Information, the Supplemental Pro Forma Data for period ended and the WFS Financial Results for the three and twelve month periods ended ( Financials ). It should be read in conjunction with these documents. This Analysis and Commentary compares the Supplemental Pro Forma Data for the period ended with the Other Financial and Pro Forma Data of WFS for the twelve months ended as provided in the Offering Memorandum dated February 5, 2016 ( OM ). Capitalized terms used herein but not defined shall have the meanings ascribed such terms in the Unaudited Pro Forma Consolidated Financial Information, the Supplemental Pro Forma Data, the Financials and the OM. FORWARD-LOOKING STATEMENTS Various statements contained in this Analysis and Commentary constitute forward-looking statements. All statements other than statements of historical fact included in this Analysis and Commentary, including, without limitation, statements regarding our future financial position, strategy, anticipated investments, costs and results (including growth prospects in particular countries), plans, projects to enhance efficiency, impact of governmental regulations or actions, litigation outcomes and timetables, future capital expenditures, liquidity requirements, the successful integration of acquisitions and joint ventures into our group, and objectives of management for future operations, may be deemed to be forward-looking statements. When used in this Analysis and Commentary, the words believe, anticipate, should, intend, plan, will, expect, estimates, positioned and strategy and similar expressions identify these forward-looking statements. These forwardlooking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated, projected, forecasted, estimated or budgeted, whether expressed or implied, by these forward-looking statements. The OM includes a section captioned Risk Factors, which should be considered when reading this Analysis and Commentary. The risks included there are not exhaustive. WFS operates in a highly competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We assume no obligation to update this Analysis and Commentary to reflect actual results, changes in assumptions or changes in factors affecting these statements. Unless the context indicates otherwise, in this Analysis and Commentary, references to we, us, our, the Group, or WFS Group refer to WFS Global Holding SAS and its consolidated subsidiaries. Company Overview Founded in 1971, WFS ( is the world s largest air cargo handler and one of the leading providers of ground handling and technical services with annual revenues of over 1 billion. Its 16,000 employees serve over 300 airlines at 200 major airports in more than 22 countries on five continents. ANALYSIS and COMMENTARY ON PRO FORMA DATA OF WFS Summary Analysis of Revenue, EBITDA and Adjusted EBITDA WFS WFS Revenue (reported French GAAP) (a) EBITDA (4.7) Business Tax expense (0.2) Restructuring, closing and severance costs (1.6) Pensions (0.4) Transaction costs (1.4) Other non-recurring items (b) Adjusted EBITDA (1.4) (c) 2

3 (a) Trailing twelve month French GAAP revenue increased by 33.2 million primarily from: i. Orbital revenue increase of 3.8 million, generally attributable to the consolidation of 100% during the quarter ended rather than 55% during the quarter ended 2014; ii. Startup revenue increase of 7.7 million attributable to Italy ground operations; iii. FCS revenues of 6.2 million from the consolidation of the two months ended ; iv. Positive foreign exchange impact from the year over year strengthening of the US dollar and the British pound of 8.8 million; and, v. Net revenue growth across the rest of the business of 6.7 million primarily attributable to cargo operations in Spain and the UK. (b) Other non-recurring items increased by 7.0 million primarily from: i. One-time charge of 3.4 million to provide against amounts due from the former employer of Italy ground operations personnel because of recoverability doubts; ii. Wind down costs of discontinuing operations in Sweden of 0.9 million; iii. Payment to employees associated with the sale of the WFS share capital of 1.8 million; and, iv. Advisory fees and expenses payable to Parent of 0.9 million. (c) Adjusted EBITDA decreased by 1.4 million primarily attributable to losses from the startup of ground operations in Spain and Italy. Summary Analysis of Revenue, EBITDA and Adjusted EBITDA CAS Revenue (a) EBITDA (13.6) Restructuring, closing and severance costs (b) Transaction costs Other non-recurring items Adjusted EBITDA (1.5) (c) (a) Revenue increased by 13.0 million due to: i. Net revenue growth of 5.0 million primarily from existing customers and ground operations expansion at two locations; and, ii. Positive foreign exchange impact from the year over year strengthening of the US dollar of 8.0 million. (b) Add-back for restructuring, closing and severance costs increased by 10.1 million due to reserve incurred in connection with legal matters. See below, Other Matters and Discussion, Legal Provisions - CAS. (c) Adjusted EBITDA decreased by 1.5 million due to accrual of workers compensation liability at of 2.9 million included in EBITDA, partially offset by the increased add-back of other non-recurring items of 1.3 million. See below, Other Matters and Discussion, Workers Compensation CAS. [Remainder of page is blank.] 3

4 Analysis of Pro Forma Data of WFS The following table was published in the Supplemental Pro Forma Data for the Period Ended and presents unaudited financial information of WFS, which we use to analyze our business on a consolidated basis. Certain data is presented on an as adjusted basis for the refinancing of our Existing Indebtedness and on a pro forma basis to reflect our CAS, Orbital and FCS acquisitions, in each case for the periods indicated: ( in millions except percentages and ratios) (1) Revenue - WFS (2) Pro forma revenue , (3) EBITDA - WFS (4.7) (4) Adjusted EBITDA - WFS (1.4) (5) Adjusted EBITDA Margin - WFS 8.2% 7.7% (0.5%) (6) Pro forma adjusted EBITDA (0.2) (7) Pro forma adjusted EBITDA margin 11.4% 10.6% (0.8%) (8) Net capital expenditures - WFS (11.2) (14.9) (3.7) (9) Change in working capital - WFS (10) Adjusted pre-tax free cash flow - WFS (1.7) (11) As adjusted total debt (12) As adjusted cash and cash equivalents and marketable securities (17.0) (13) As adjusted net senior secured debt (14) As adjusted net debt (15) As adjusted cash interest expense (52.3) (52.6) (0.3) (16) Ratio of as adjusted total debt to pro forma adjusted EBITDA 4.6x 4.8x 0.2x (16) Ratio of adjusted net senior secured debt to pro forma adjusted EBITDA 2.9x 3.2x 0.3x (16) Ratio of as adjusted net debt to pro forma adjusted EBITDA 4.2x 4.5x 0.3x (16) Ratio of pro forma adjusted EBITDA to as adjusted cash interest expense 2.1x 2.1x 0.0x Year ended compared to Twelve Months ended, as presented in the OM 1. Revenues WFS. See above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA for both WFS and CAS. 2. Pro forma revenue. Pro forma revenue increased by 70.6 million: WFS (a) CAS (b) ORBITAL (3.5) (c) FCS (d) Total pro-forma revenue , (a) See above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA WFS. (b) See above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA CAS. (c) Orbital decrease is mainly from change of consolidation from 55% in 2014 to 100% beginning May 29,. (d) FCS increase due to inclusion of pro forma revenue from January through October. FCS controlling share was acquired on November 2, so not considered in the OM pro forma revenue as of. 3. EBITDA WFS. See above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA for WFS. 4. Adjusted EBITDA WFS. See above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA for WFS. 5. Adjusted EBITDA margin WFS. Adjusted EBITDA margin WFS decreased primarily due to greater proportion of lower margin ground handling revenue related to the start-up operations in Italy and Spain for the quarter ended versus for the quarter ended See Revenues section of the Financials for year over year revenue by segment details. 4

5 6. Pro forma adjusted EBITDA. Pro forma adjusted EBITDA decreased by 0.2 million in the year ended compared to the twelve-month period ended : Twelve months ended WFS (1.4) (a) CAS (1.5) (b) Orbital (1.1) (c) FCS - (0.7) (0.7) (d) Adjusted EBITDA (4.7) CAS synergies (e) FCS synergies (f) Add-back: Discontinued operation (g) Pro forma adjusted EBITDA (including synergies) (0.2) (a) See above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA WFS. (b) See above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA CAS. (c) Orbital decrease is due to difference in change of consolidation percentages from 55% in 2014 to 100% beginning May 29,. (d) FCS decrease is due to inclusion of pro forma Adjusted EBITDA from January to October. (e) CAS synergies - see below Synergies. (f) FCS synergies - see below Synergies. (g) Cargo operations in Sweden are being terminated pursuant to a shutdown plan and are treated as discontinued operations. 7. Pro forma adjusted EBITDA margin. The pro forma adjusted EBITDA margin decreased primarily due to lower adjusted EBITDA margins for WFS and CAS, see above Summary Analysis of Revenue, EBITDA and Adjusted EBITDA WFS, Summary Analysis of Revenue, EBITDA and Adjusted EBITDA CAS, and Adjusted EBITDA Margin WFS. 8. Net capital expenditures WFS. Increase of 3.7 million for the year ended compared to the twelve-month period ended, primarily driven by growth of cargo operations in the UK and ground operations in Spain. 9. Change in working capital - WFS. Change in working capital in the Supplemental Pro Forma Data was calculated exclusive of financing costs associated with senior secured debt, which under French GAAP are required to be included in working capital. Net change in working capital per Financials for the year ended was ( 16.2) million and was adjusted by 18.9 million in financing costs from WFS Transaction paid in the quarter ended. The remaining 2.7 million source of cash was primarily due to improvements in payment terms with suppliers. 10. Adjusted pre-tax cash flow WFS. Decrease of 1.7 million from the year ended compared to the twelve-month period ended : Adjusted EBITDA (1.4) Business tax expenses (3.6) (3.4) 0.2 Change in provision (0.7) Change in working capital Net capital expenditures (11.2) (14.9) (3.7) Adjusted pre-tax free cash flow (1.7) 5

6 11. As adjusted total debt. As adjusted total debt increased by 15.9 million from to : RCF Existing Senior Secured Additional Senior Notes Senior Unsecured Factoring (5.5) Financing lease - CAS Financing lease - WFS Bank overdraft As adjusted total debt Total debt fluctuates based on the financing requirements of the business. Draws were made on the Revolving Credit Facility (RCF). The factoring balance is based on the billings and collections from customers. WFS assumed 7.0 million in financing leases as part of the CAS Acquisition which were presented as settled in the OM. Financing leases for WFS grew 7.2 million mainly to fund capital expenditures supporting the growth of ground operations in Spain. 12. As adjusted cash and cash equivalents and marketable securities. As adjusted cash and cash equivalents and marketable securities decreased by 17.0 million from to : Cash and cash equivalents and marketable securities - WFS (19.4) Cash and cash equivalents and marketable securities - CAS As adjusted cash and cash equivalents and marketable securities (17.0) As adjusted cash and cash equivalents and marketable securities decreased primarily due to the one-time payment of 18.9 million for financing costs associated with the senior secured notes subsequent to the closing of WFS Acquisition during the quarter ended. 13. As adjusted net senior secured debt. As adjusted net senior secured debt increased by 31.7 million for the twelve-month period ended compared to the year ended : December 31, Existing Senior Secured Additional Senior Notes Factoring (5.5) Financing lease RCF Cash and cash equivalents and marketable securities (49.4) (32.4) 17.0 As adjusted net senior secured debt

7 14. As adjusted net debt. As adjusted net debt increased by 32.9 million from the twelve-month period ended compared to the year ended : RCF Existing Senior Secured Additional Senior Notes Senior Unsecured Factoring (5.5) Financing lease - CAS Financing lease - WFS Bank overdraft Cash and cash equivalents and marketable securities - WFS (48.1) (28.7) 19.4 Cash and cash equivalents and marketable securities - CAS (1.3) (3.8) (2.5) As adjusted net debt As adjusted cash interest expense. As adjusted cash interest expense increased by 0.3 million from the year ended compared to the twelve-month period ended : December 31, Factoring (0.1) Financial Leases RCF - used RCF - not used (0.1) New RCF - used New RCF - not used Senior secured notes million Add-on senior secured notes million New unsecured notes million Adjusted cash interest expense Ratio of as adjusted total debt to pro forma adjusted EBITDA, ratio of adjusted net senior secured debt to pro forma adjusted EBITDA, ratio of as adjusted net debt to pro forma adjusted EBITDA, ratio of pro forma adjusted EBITDA to as adjusted cash interest expense. All ratios were adjusted to reflect the new values in the pro forma financial information for the year ended. Accordingly, the changes in ratios reflect the underlying explanations as provided in the aforementioned comparisons. Other Matters and Discussion Legal Provisions - CAS. The majority of the 11.2 million CAS restructuring, closing and severance costs is comprised of a 9.9 million reserve relating to a plaintiff seeking class action certification in California for claims arising out of alleged labor code violations, specifically certain alleged failures to authorize or permit lawful meal and rest breaks. The reserve estimate was based upon employee records and an assessment of the likelihood of class certification and claim success. We intend to defend against these claims vigorously and our diligence continues. Workers Compensation - CAS. CAS trailing twelve months EBITDA decreased 2.9 million due mainly to a workers compensation liability adjustment. An actuarial valuation was completed in conjunction with the CAS audit for the period ended and the majority of this adjustment was to account for liabilities accrued as of this date. CAS reported 3.9 million as other non-recurring addbacks to EBITDA including 568 thousand for workers compensation liability relating to prior periods. While we are still evaluating the impact on annualized costs, we currently believe the majority of the 2.9 million workers compensation reserve adjustment not already treated as a non-recurring add-back represents a one-time balance sheet adjustment, and not an increase in the recurring cost base. The actuarial valuation provided a range of estimated liability. Over time, actual claims experience will further adjust these estimated liabilities. 7

8 Synergies. We continue to believe WFS will realize the 18.8 million of CAS synergies projected in the OM. The 19.5 million addback to Adjusted EBITDA at reflects the difference in foreign exchange rate used. The underlying US dollar commitment remains the same. We believe that these synergies will be realized at a faster pace within the 48 months previously disclosed in the OM with estimated $11-13 million captured into earnings within one year of CAS acquisition date. Additionally, we believe 3.8 million of FCS cost savings synergies will be realized in calendar year 2016 attributable to the consolidation of workforce, warehouse and cargo operations in Germany. In 2017, we expect FCS will begin to have up to 0.8 million of dis-synergies as wholly owned WFS moves contracts to FCS which is 51% consolidated. [Remainder of page is blank.] 8